GAB Decision 210
August 31, 1982 Maryland Department of Health and Mental Hygiene;
Docket No. 78-28-MD-HC Ford, Cecilia; Settle, Norval Garrett, Donald
On April 21, 1978, the Acting Assistant Director for Financial
Management, Health Care Financing Administration (HCFA, Agency), issued
a notification of disallowance to the Maryland Department of Health and
Mental Hygiene (State), denying $375,413 in Federal financial
participation (FFP) for skilled nursing facility (SNF) services rendered
under Title XIX of the Social Security Act, the Medicaid program. The
disallowance, based on an HEW Audit Agency review (Audit Control No.
03-70154) of Title XIX payments made to nursing homes in Maryland for
the period July 1, 1972 through June 30, 1976, involved three nursing
facilities:
Nursing Home A $286,636 Nursing Home B 17,484 Nursing Home C
71,293 $375,413
On May 16, 1978, the State submitted to the Board an application for
review of the disallowance in the amount of $357,929 for Nursing Homes A
and C. The State did not appeal the disallowance of $17,484 for Nursing
Home B.
There are no material issues of fact in dispute. We have, therefore,
determined to proceed to decision based on the written record and
briefs, including the parties' responses to an Order to Show Cause
issued on July 8, 1981.
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 (1976), "Services and Payment in Medical
Assistance Programs."
FFP in payments to a facility providing skilled nursing services is
available only if the facility is certified as having met all the
requirements for participation in the Medicaid program as evidenced by
an agreement (provider agreement) between the single state agency (2)
and the facility. 45 CFR 249.10(b)(4)(i)(C). The execution of the
provider agreement is contingent upon certification of the facility by
an agency designated as responsible for licensing health institutions in
the state (state survey agency). 45 CFR 249.33(a)(6).
The state survey agency is required to certify that the facility is
in compliance with each condition of participation. 45 CFR 249.33(a)(
4)(i). In order for the state to obtain FFP, the execution of the
provider agreement must be in accordance with the federal regulations.
45 CFR 249.33(a)(6). A facility which does not qualify under Sec.
249.33 is not recognized as a skilled nursing facility for purposes of
payment under the Medicaid program. 45 CFR 249.33(a)(10).
While a state may grant waivers for an intermediate care facility
found to have deficiencies under the Life Safety Code (45 CFR 249.33(
a)(2)), any waivers of deficiencies under the Life Safety Code for a SNF
must be approved by the Agency. See Section 186(j)(13) of the Social
Security Act and 45 CFR 249.33(a)(1)(i).
Nursing Home A
Factual Background
Nursing Home A had a history of Life Safety Code (LSC) deficiencies,
particularly the housing of non-ambulatory and disabled patients above
the ground floor and no acceptable means of exiting from the building
during an emergency. In 1971 the State notified the facility that no
waivers would be granted and that the facility should discontinue
housing non-ambulatory patients above the ground floor. In June 1972,
the facility was given a six month provider agreement which was
subsequently extended through June 30, 1973. Another agreement was then
entered into with an expiration date of March 31, 1974. While these
agreements were in effect, conditions at the facility, including the
housing of non-ambulatory patients above the ground floor, remained
virtually unchanged.
A new provider agreement was not executed with the facility because
of these LSC deficiencies. On January 16, 1975 the State survey agency,
the Division of Licensing and Certification (DLC), received a letter
from the Agency's Regional Office of Long Term Care Standards
Enforcement (ROLTCSE) stating that requested LSC waivers were denied.
The record does not indicate when the waivers were requested or whether
the waivers would have covered all of the LSC deficiencies existing at
the time of the provider agreement's expiration. On March 3, 1975 DLC
informed the facility of its intent to decertify. In March 1975 the
facility formally appealed the decertification action.
(3) Negotiations then began between the facility and ROLTCSE which
resulted in the ROLTCSE's forwarding to DLC of a "conditional
acceptance" of the waivers, apparently pertaining to some of the
deficiencies, but again citing the non-ambulatory issue. Further
negotiations then ensued among the facility, DLC and ROLTCSE concerning
patient placement and the possibility of erecting stairtowers. Because
of these negotiations, DLC discontinued decertification procedures, but
still did not recertify the facility.
On October 20, 1975, DLC, not having heard anything further from
ROLTCSE, again recommended decertification and also sent a letter to
ROLTCSE requesting a decision denying all LSC waivers. On October 28,
1975 ROLTCSE rescinded whatever waivers were in effect. On November 20,
1975 a meeting was held with DLC, ROLTCSE, the facility, and other
participants concerning the issue of stairtower construction. DLC, as a
result of commitments made by ROLTCSE and the facility, again terminated
its decertification procedures. The facility and ROLTCSE then began to
communicate with each other in order to develop a revised plan of
correction, excluding DLC from the negotiations despite its protests.
Ultimately, in August 1976, a plan of correction was developed as a
result of negotiations between the facility and ROLTCSE.
The Agency disallowed FFP in the amount of $286,636 in payments to
Nursing Home A for the period May 1, 1974 through June 30, 1976 (the
audit on which the disallowance is based only concerned the time up to
June 30, 1976).
Parties' Arguments
In response to the Agency's position that the facility lacked a valid
Medicaid provider agreement, the State argues that the actions of the
Agency's ROLTCSE prevented the decertification of the facility. The
State claims that its DLC "twice attempted to decertify and was thwarted
in each attempt by contravening Regional Office measures which further
encouraged the facility to pursue alternative solutions." (Application
for Review, p. 3.)
The State further argues that "the facility should be considered
certified during this period, since a final decision on Life Safety Code
waiver approvals or denials was not made by the Regional Office, as is
their responsibility." (Application for Review, p. 4.) Terming a
provider agreement a "paper agreement," the State considers that the
facility was certified during the period that "the Regional Office
did... unnecessarily prolong the process, and by providing alternatives,
prevented the Division from taking proper administrative action."
(Application for Review, p. 4.)
(4) The Agency argues in response, "There is nothing in the Social
Security Act or Federal regulations that supports (the) contention nor
in any way mandates HEW to act upon a waiver request, much less a
requirement that Federal funding must continue pending a decision on
waiver requests." (Agency Response, p. 7.)
Discussion
The central issues regarding the disallowance for this facility are
whether the State's claim that the actions of the Agency's ROLTCSE
prevented the State from decertifying the facility is valid, and, if so,
whether that provides a basis for the Board to reverse the disallowance.
Certain relevant facts are uncontested. The facility's provider
agreement expired on March 31, 1974. After that date patients remained
in a facility with serious LSC deficiencies. In spite of this
facility's history of LSC deficiencies involving patient placement, the
State waited until March 3, 1975, nearly a year after the expiration of
the provider agreement, before initiating any action regarding the
facility's decertification.
For the period of the disallowance the State neither certified
Nursing Home A nor executed a provider agreement with it. The
facility's period of Medicaid certification expired along with its
provider agreement on March 31, 1974. The Medicaid regulations are
explicit in requiring both a certification and a provider agreement for
FFP to be claimed. The mere pendency of an appeal relating to
certification questions does not create a presumption of continued
certification. In this sense, it is irrelevant whether the State was
deterred from using its administrative appeals process to decertify the
facility since FFP is available only for the duration of the provider
agreement.* Accordingly, there is no basis for FFP throughout the
disallowance period arising from a certification and a provider
agreement.
Furthermore, the State has not shown that it was reasonable to
believe, given the history of the facility, that ROLTCSE might approve
the waivers or that it might do so within a particular time frame.
When, starting in March 1975, the State did begin decertification
proceedings and the facility appealed, the State (5) twice unilaterally
ceased the decertification action upon learning of negotiations between
the facility and ROLTCSE concerning the stairtower alternative.
The State's allegation that ROLTCSE was solely responsible for its
inability to decertify this facility is unwarranted. The facility's
administrator offered on several occasions counter plans to ROLTCSE's
stairtower proposal. (Audit Report, p. 5.) The State has not denied
that this contributed to the length of the negotiations. ROLTCSE's
willingness to enter into negotiations with the facility should not have
been viewed by the State as a directive for the State not to pursue its
own course of action in regard to the facility. We do not see how these
negotiations "thwarted" the State's attempts to decertify the facility.
In its July 8, 1981 Order, the Board directed the State to show cause
why the disallowance for Nursing Home A should not be sustained on the
grounds that there is no federal regulation authorizing FFP after the
expiration of a provider agreement while waiver requests are being
considered by the Agency and that there was no reasonable reliance by
the State, given the facility's history of LSC problems, that ROLTCSE
would grant waivers for the facility. The Order also asked the Agency
to explain the role of ROLTCSE in the process of granting or denying
waivers for LSC deficiencies.
In its response to the Order the State has answered, apparently by
mistake, the questions that were directed to the Agency and has not
offered any new arguments as to why the disallowance should not be
sustained on the grounds cited in the Order. The State continues to
maintain that "the involvement of ROLTCSE in the waiver negotiations
indicated a federal desire to continue the certification of the facility
if at all possible, as ROLTCSE could have initially denied the waiver
request, and ended the facility's Title XIX participation..." (State's
response to the Order, p. 3.) The State concludes its argument,
"ROLTCSE, by negotiating the waiver request directly with the facility,
and excluding the State from this this process, effectively took
responsibility for the decertification negotiations and prevented the
State from exercising any authority or responsibility concerning the
issue of LSC violations, the very issue upon which the question of
decertification hung." (State's response to Order, p. 4.)
The State in its response to the Order stated that the usual time
frame for approving or denying a request for LSC waivers encompassed up
to 90 days for a preliminary determination by the State Fire Marshall,
and up to 90 additional days for a final response by ROLTCSE. The
Agency stated that it is difficult to generalize about the length of
time necessary to process waiver requests because of the complexity of
issues raised in waiver requests. Both the State (6) and the Agency did
agree, however, that it is unusual for ROLTCSE to negotiate directly or
exclusively with a facility.
While ROLTCSE arguably may have been dilatory in reaching its
decision on the LSC waivers for the facility and may have departed from
usual practice by negotiating directly with the facility, the State has
failed to show how ROLTCSE in any way prevented the State from
decertifying the facility. Furthermore, the State has not demonstrated
that ROLTCSE or any other Agency office suggested that the State not
proceed with the decertification of the facility. Indeed, the State
delayed for 12 months before initiating any decertification action. The
State, not ROLTCSE, has responsibility for the certification and
execution of a provider agreement, which in turn provide the basis for
FFP. The State must bear the risk for making payments to the facility
after its provider agreement and certification had expired. Even though
LSC waivers were pending during the period of the disallowance, there is
no federal regulation allowing FFP for a Medicaid SNF, absent a provider
agreement, while the Agency is considering waiver requests. We
therefore sustain the disallowance for Nursing Home A in the full amount
of $286,636.
Nursing Home C
Factual Background
Nursing Home C was issued a provider agreement for the period
February 1, 1975 to January 31, 1976. The agreement contained an
automatic cancellation clause providing that, if certain health and LSC
deficiencies found during a survey conducted in October 1974 were not
corrected prior to September 30, 1975, the agreement would be cancelled
on that date. In an October 7, 1975 letter, the single State agency
notified Nursing Home C that the cancellation clause would be invoked
and that its certification would be cancelled. Pursuant to Maryland
State law, the facility appealed the single State agency's
determination. In a November 29, 1975 pre-hearing conference it was
determined that the facility did not have as many deficiencies as the
survey report noted and that a lack of understanding existed as to the
required documentation for certain certification standards. It was
decided that the State survey agency and the facility's
owner-administrator would work together to provide the necessary
documentation.
Over the next four months all the deficiencies, with the exception of
the lack of a required emergency generator on the premises, were
apparently corrected. The State claims that a hearing was scheduled for
August 5, 1976, at which time the State and the facility agreed (7) that
the generator had been installed and the action to decertify the
facility was dropped. (Application for Review, p. 4.)
The Agency disallowed FFP in the amount of $71,293 for SNF services
rendered at Nursing Home C for the period November 1, 1975 to June 30,
1976.
State's Arguments
Concerning Nursing Home C, the State argues that it cannot revoke
licensure or certification without affording the facility the
opportunity for a due process hearing. The State contends that, when a
facility appeals a DLC determination to invoke the automatic
cancellation clause of a provider agreement, "(a) contract exists until
the nursing home exhausts its right of appeal, and payments must be made
to a facility during this period." (Application for Review, p. 4.) In
its Application for Review the State argued that its State law requires
that facilities facing revocation action must be afforded a hearing, and
that FFP is available until all appeals have been exhausted. In
response to the Board's Order, the State claims that State departmental
regulations contemplate the continuance of the facility's certification
throughout the available administrative appeals process.
Discussion
The central issue regarding the disallowance concerning this facility
is the availability of FFP during a provider appeal.
The Board has recently issued a series of decisions in which it has
given close examination to the question of the availability of FFP
during provider appeals. In Ohio Department of Public Welfare, Decision
No. 173, April 30, 1981, the Board examined the effect of a 1971 Agency
Program Regulation Guide, MSA-PRG-11, on provider appeals. PRG-11 set
out two instances in which FFP would be allowable in payments by a state
to a facility even where the provider agreement has not been renewed or
has been terminated:
1) (If) State law provides for continued validity of the provider
agreement pending appeal; or
2) (If) the facility is upheld on appeal and State law provides for
retroactive reinstatement of the agreement.
In Ohio the Board found that PRG-11 was still in effect during the
period in question and that PRG-11 allowed for FFP to be paid for a
period up to twelve months, subject to certain conditions, after (8) the
termination or nonrenewal of a provider agreement where a state was
directed by a court order to continue payments to a facility while it
appealed its decertification.
In Colorado Department of Social Services, Decision No. 187, May 31,
1981, the Board found that PRG-11 also applied to provider appeals
arising under a state law that explicitly provided that a facility's
certification continued in effect throughout an appeals process. In
Nebraska Department of Public Welfare, Decision No. 174, April 30, 1981,
however, the Board held that the provisions of PRG-11 did not apply to a
Nebraska law which provides for the continued validity of licenses
pending appeal, but is silent as to certifications. The Board found
that the Nebraska appeals pertained solely to specific state licensing
requirements and were not regarded as appeals of Medicaid
decertifications.
The exceptions to the general rule that FFP is not available where a
provider agreement has expired and not been renewed or has been
terminated, elucidated in the Board's Ohio and Colorado decisions, do
not apply to this facility.
Unlike the Colorado Administrative Procedure Act (COLO. REV. STAT.
Secs. 24-4-101 et seq., 1973), neither the Maryland Administrative
Procedure Act (MD. ANN. CODE, art. 41, Secs. 244 et seq., 1957) nor
other relevant Maryland law (art. 43, Secs. 556-563) provides that a
facility's Medicaid certification remains in effect throughout an
appeals process.
No court order is involved here as was the case in Ohio.
Furthermore, the March 5, 1976 letter from a Maryland Assistant Attorney
General, submitted by the State in its Application for Review, states,
"There is not a specific (Maryland) statutory requirement that the
validity of the Title XIX only provider agreements continue pending
appeal." The letter only refers to the effect of the Maryland State
statutory law on a license revocation, and not a Medicaid
decertification.
In its July 8, 1981 Order the Board asked the State why the
disallowance for Nursing Home C should not be sustained on the basis of
the Board's Nebraska decision. In its response to the Order the State
argues that "the decertification (under a contract with six months to
run) was not effective prior to the decision of the Secretary of the
Department of Health and Mental Hygiene (DHMH)." (State response, p.
1.) The State, while conceding that the Maryland APA does not address
the issue of when an administrative decision becomes final, contends
that DHMH regulations "contemplate... continuation of the certification
throughout the available administrative appeals process." (State
response, p. 2.) The State adds (9) that the act of decertification was
never officially ratified by the DHMH Secretary because the deficiencies
were remedied and the decertification proceedings dropped during the
hearing process. Therefore, the State argues, "(Retroactive)
reinstatement of the certification and the provider agreement were
accomplished by the ultimate resolution of the appeal in favor of the
provider." (State response, p. 2.)
We do not find anything in the State's arguments that would lead us
to depart from our tentative conclusion, expressed in the Order, that
PRG-11 does not apply here. The facility's provider agreement is
contingent upon the facility's certification. The original
certification, and consequently the provider agreement, had an automatic
cancellation date of September 30, 1975 if corrections of deficiencies
were not made. The deficiencies were not corrected at that time.
Therefore, both the certification and provider agreement ended as of
that date; the agreement did not then have six more months to run.
Contrary to the State's assertion that the appeal was resolved in
favor of the provider, which, if true, might invoke the second exception
of PRG-11, we find that the provider was not actually upheld on appeal.
One of the stated deficiencies that led to the invocation of the
automatic cancellation clause, the lack of an emergency generator, was
not found to be erroneous during the appeals process. Rather, the
facility corrected the deficiency by installing a generator. We do not
consider this to be a situation where during the appeals process the
State's determination regarding a deficiency has been proven to be
incorrect.
The requirement of the first exception of PRG-11 is that State law
provide for the continued validity of a provider agreement pending
appeal. The State of Colorado met that requirement in its APA. The
burden was on Maryland to demonstrate that under its State law the
facility's certification and provider agreement continued in effect
pending appeal of the initial determination of the State survey agency.
In response the State has referred to DHMH regulations. These
regulations, COMAR 10.01.03, generally set forth the procedures for
hearings before the DHMH Secretary. The cited regulations are deficient
for the State's case before us because they do not clearly indicate who
has the right to have a case reviewed by the Secretary and because there
is nothing in the regulations that specifically bars the immediate
implementation of an initial determination. The regulations are
ambiguous as to whether an initial determination could be implemented at
once or must be affirmed first by the DHMH Secretary.
(10) In Colorado the Board found that under Colorado State law a
provider agreement continued in effect during the pendency of an appeal.
The State has not shown that there is a comparable Maryland law. We
find that the cited State's departmental regulations are inadequate to
trigger the operation of PRG-11 so that FFP may be allowed during the
facility's appeal. Accordingly, we sustain the disallowance for Nursing
Home C in the full amount of $71,293.
Conclusion
For the reasons stated above, the disallowances for Nursing Homes A
and C are sustained in full. * The State has not argued that its
provider agreement with Nursing Home A was effectively continued beyond
the expiration date while decertification actions were pending and that
the first part of PRG-11, discussed infra, provided a basis for the
payment of FFP. As we conclude with regard to Nursing Home C, however,
the State has not demonstrated that its State law would trigger
operation of PRG-11.
SEPTEMBER 22, 1983