GAB Decision 215
September 24, 1981 Minnesota Department of Public Welfare; Docket No.
79-213-MH-HC Ford, Cecilia; Garrett, Donald Settle, Norval
Introduction
On November 1, 1979, the Minnesota Department of Public Welfare
(State) requested review of the October 2, 1979 determination by the
Health Care Financing Administration (HCFA, Agency) disallowing $83,466
in Federal financial participation (FFP) in payments made to thirteen
intermediate care facilities for the mentally retarded (ICF/MRs). HCFA
determined that there were no valid provider agreements in effect
between the facilities and the State and disallowed FFP for the quarter
ended March 31, 1979 for services rendered during that quarter. /1/
This decision is based on the State's application for review, the
Agency's response to the appeal, two Orders to Show Cause (one of which
also encompassed a number of appeals brought by other States), the
State's response to the Orders, the transcript of an informal conference
held February 11-12, 1981 in which Minnesota and eight other states
participated, the State's post-conference brief, the Agency's response
to the State's post-conference brief, and supplementary documents sent
by the State on August 4, 5, and September 4, 1981.
As will be discussed below, we find that Minnesota law does provide
for the continued validity of a provider agreement pending appeal from
its nonrenewal after expiration and therefore brings this appeal within
the scope of MSA-PRG-11. The disallowance is only partially overturned,
however, based on the facts involved in the appeal.
Statement of the Case
Between 1975 and 1978, the thirteen ICF/MRs involved in this appeal
were surveyed by the State survey agency and cited for various Life
Safety Code (LSC) violation. They were: Nekton on Springvale, Nekton
(2)on London, Nekton on Greysolon, Nekton on Stillwater Lane, Nekton on
Frost, Nekton on Minnehaha Park, /2/ Nekton on Queen, Nekton on William,
Nekton on Mississippi, Nekton on Wyoming, Nekton on Imperial Court,
Uptown Group Living Project. After receiving a "Statement of
Deficiencies," each facility requested a hearing to appeal the survey
agency's interpretation of the LSC. When the facilities' certifications
and provider agreements expired, they were not renewed.
After "prolonged debate" (State's Response to Order to Show Cause,
p.
3) between the survey agency and the facilities over proper
interpretation of the LSC, the survey agency requested interpretations
from HEW and the National Fire Protection Association (NFPA) in July
1978. In January 1979, having heard nothing from NFPA, the survey
agency "decided . . . to proceed to hearing." (Id.)
In early April 1979, the survey agency "released" all the survey
data
it had been accumulating from the periodic inspections conducted after
the initial citations of deficiencies and issued certifications for the
periods during the appeals. On May 10, 1979, the survey agency noticed
a hearing for July, but the hearing was continued for discovery
purposes.
On August 7, 1979, VFPA sent its interpretation of the relevant LSC
standards and, according to the State, "found the (survey agency's)
interpretation of the LSC to be incorrect." (Id. p. 4.) As a result, the
survey agency notified the State Office of Hearing Examiners on February
6, 1980 that it had accepted plans of correction pertaining to one of
the deficiencies and that the remaining existing deficiencies should be
dismissed without prejudice to the survey agency's right to reinspect.
The Hearing Examiner dismissed the appeals on February 7, 1980.
Discussion
1. MSA-PRG-11
MSA-PRG-11 (PRG-11), a December 1971 Program Regulation Guide issued
by the predecessor of HCFA, sets out the basic rule that FFP is not
available if a facility does not have a currently effective provider
agreement, but notes two exceptions: (3) 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.
HCFA has contended that even if the State is required by State law to
continue payments, FFP is not authorized because the first part of PRG -
11 has been superceded by subsequent regulations. However, in Ohio
Department of Public Welfare, Decision No. 173, April 30, 1981, the
Board held (p. 14) that PRG - 11 had not been nullified, repealed, or
amended. The Board applied the first exception set forth in PRG - 11
where a facility appealed the termination or nonrenewal of its provider
agreement and a court ordered the state to continue payments. The
effect of this exception is limited in duration, as discussed in the
second part of this discussion. In Colorado Department of Social
Services, Decision No. 187, May 31, 1981, the Board concluded (p. 7)
that its holding in Ohio also applied to an appeal under the Colorado
Administrative Procedure Act. See also, Georgia Department of Medical
Assistance, Decision No. 192, June 30, 1981.
Based on the analysis below, we conclude that the Minnesota state law
does provide for continued validity of a provider agreement pending
appeal. The second exception set forth in PRG - 11 will be be examined
in the third part of this discussion, "The Outcome of the Appeals
Process."
As to the first exception set forth in PRG - 11, the State argues
that the Minnesota Administrative Procedures Act, Minn. Stat. Secs.
15.0411 to 15.052 (1980), "makes clear that the decision of the
officials of a state agency are merely proposed decisions or orders that
are not final until after a state Hearing Examiner issues a report to
the parties." (State's Response to Order to Show Cause, p. 5.) In
particular, the State cites Sec.15.0421 which states in part:
Proposal for decision in contested case
In all contested cases the decision of the officials of the agency
who are to render the final decision shall not be made until the report
of the hearing examiner ... has been made available to parties...and an
opportunity has been afforded to each party... to file exceptions and
present argument.... /3/
(4) There is also a definition of "final decision" in Minn. Stat.
Sec.
15.0424 which states that it:
shall not embrace a proposed or tentative decision until it has
become the decision of the agency either by express approval or by the
failure of an aggrieved person to file exceptions thereto within a
prescribed time under the agency's rules.
The State asserts, and the Agency does not deny, that all the
providers' appeals here were "contested cases."
Thus, the initial determination of the (survey agency) that
deficiencies the LSC standards exist and that an ICF/MR should be
decertified is merely a proposed decision that is not final until
completion of the contested case hearing procedures. (State Response to
Order to Show Cause, p. 6.)
The State asserts that the Statements of Deficiencies were such
proposed decisions and that the appeals were taken from these proposed
decisions. Given the ordinary meaning of the word "propose", we cannot
say that, under Minnisota law, the "proposed" decision was in any
way
binding at that point, and certainly not once it was appealed. /4/
Implicit in the Minnesota scheme is the concept that since there is no
actual binding decision until there is a "final" decision, the provider
agreement would remain in effect in the absence of such a "final"
decision.
The case before us can be distinguished from the facts in Nebraska
Department of Public Welfare, Decision No. 174, April 30, 1981. In
Nebraska, the Board held that the provisions of PRG - 11 did not apply
to a Nebraska law which provides for the continued validity of state
licenses, 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. In this appeal, however, the applicable State stature
is broad enough on its face to encompass Medicaid decertifications, and
the facilities were clearly appealing proposed decisions affecting their
Medicaid provider agreements.
We find, therefore, that Minnesota law meets the requirements of a
State law for the purpose of the first exception set forth in PRG - 11.
(5) 2. The Effect of Annual Surveys
The Ohio decision stated that if the first exception set out in PRG -
11 is applicable, the rule for providing FFP following the expiration
date of a provider agreement is that "the period of reimbursable
services may not exceed 12 months ... except that if within the
aforesaid 12 months a state surveys the facility and makes a new
determination on certification, FFP may not be available beyond the date
of that determination..." (p. 14). See also, Colorado Department of
Social Services, Decision No. 187, May 31, 1981, p. 8.
The disallowance in question is for services rendered during the
quarter ended March 31, 1979. Analyzing the rule in light of the
expiration dates of the provider agreements as set out in the
Notification of Disallowance, the disallowance period falls outside of
the twelve month period following expiration dates of the provider
agreements for nine of the facilities (Nekton on Greysolon, Nekton on
Stillwater Lane, Nekton on Minnehaha Park, Nekton on Queen, Nekton on
William, Nekton on Wyoming, Nekton on Imperial Court, Uptown Group
Living Project, and Sur La Rue de Skillman). No FFP therefore is
available, regardless of the applicability of PRG - 11 or the existence
of survey determinations. Four facilities, whose provider agreements
expired in 1978, remain to be considered.
On September 4, 1981, the State provided the Board with survey and
survey determination data for Nekton on Springvale, Nekton on
Mississippi, Nekton on Frost, and Nekton on London. An analysis of this
documentation for each facility indicates that there is no evidence that
a survey determination was made that was within twelve months following
the expiration of the provider agreement and would have an effect on the
disallowance period. Therefore, under the rule enunciated in our Ohio
decision, FFP should be available for services, rendered by Nekton on
Springvale and Nekton on London between January 1, 1979 and March 31,
1979 and for services rendered by Nekton on Mississippi and Nekton on
Frost between January 1, 1979 and January 31, 1979. These periods begin
with the start of the quarter covered by the disallowance and end with
either (a) and end of the quarter (if the twelve months under PRG-11 had
not yet run out) or (b) the end the twelve month period under PRG - 11
(if that happened prior to the end of the quarter).
3. The Outcome of the Appeals Process
The second exception set forth in PRG - 11 allows for FFP following
expiration of a provider agreement if "the facility is upheld on appeal
and State law provides for retroactive reinstatement of the agreement."
This exception is not relevant to this appeal because, as discussed
below, none of the ICF/MRs were upheld on appeal.
(6) The State has argued that, after having received the LSC
interpretations from NFPA, it realized that it had made incorrect
determinations as to the thirteen facilities and asked that the appeal
hearings be dismissed, and the appeals were dismissed. It has also
asserted that the facilities were surveyed annually during the appeals
process, and except for the LSC questions, were found to be certifiable.
The State has admitted, however, that plans of correction were accepted
from the facilities after the LSC interpretations were received.
The Agency, in its response to the State's conference and
post-conference briefs, contests the State's assertion as to the
contents of NFPA's interpretations and argues that certifications were
not warranted. As part of its evidence, it has submitted what it calls
"the Respondent's response to the State's inquiry concerning the Life
Safety Code" (p. 3), which is a emmorandum dated August 22, 1978 that
appears to be from one Agency official to another. We need not
determine the relative merits of the August 22, 1978 memorandum versus
NFPA's interpretations, however, because we find that the State's own
evidence contradicts its assertions.
The State's assertion that NFPA's interpretations indicated that the
survey criteria were incorrect is not supprted. The documents indicate
that with regard to a question concerning manual fire alarms (whether
standard toggle switches were acceptable), the State's original
determination that the facilities did not comply was correct. See
Exhibit 4 of the State's Response to Order to Show Cause. The State
even admitted in a letter to the Agency dated July 14, 1981, that NFPA
agreed with the State on the fire alarm question.
When the State received NFPA's interpretation, it even accepted plans
of correction for the fire alarms from the facilities which had that
deficiency (all except Uptown Living Group and Nekton on Springvale).
This action was in response to NFPA's statement that standard toggle
switches were not acceptable (Id., Exhibits 4 and 5). These facilities
cannot be considered to have been upheld on appeal. Therefore, for
those facilities with at least that deficiency or a comparable one, the
second exception set forth in PRG-11 does not apply. The deficiency
cited for Uptown Living Group pertained to proper floor separation, and
after NFPA's interpretation was received, a plan of was accepted from
the facility. Our analysis pertaining to the effect of the manual fire
alarm deficiency, therefore, applies as well to Uptown.
According to the State's submission giving a "More Definite
Statement" (Id., Exhibit 2), Nekton on Springvale was originally found
by the State not to be in compliance with five sections of the LSC
because "there is only one safe means of exit with protected vertical
openings (7) and a safe path of travel to the outside from every
sleeping room above street level." The questions presented by the State
to NFPA that are relevant to this facility are 1 - 5 and possible 6 and
7. /5/ NFPA's answers refer only to 3 and 4. NFPA states that
"questions #1, #2, and #5 were not answerable as asked" (Id., Exhibit
4). NFPA's answer to 7 was that windows do not qualify as an approved
second exit for second floor sleeping rooms in lodging and rooming
houses. The State has not provided evidence showing that the possible
answers to 1, 2, and 5 were not relevant to the certification of Nekton
on Springvale. Moreover, it appears that the answer to 7 would have had
a negative impact on that certification. The State merely asserts that
"NFPA submitted...its interpretation of the relevant LSC standards
finding the (survey agency's) interpretation of the LSC to be
incorrect." (State Response to Order to Show Cause, p. 4.) Yet, as
discussed above, the evidence provided by the State contradicts its
general assertion. With respect to its specific decision to decertify
Nekton on Springvale, moreover, the State has not provided any
affirmative evidence that this decision was incorrect, and its is a
reasonable implication from the record that the facility had
deficiencies, even under NFPA's interpretations.
(8) Therefore, Nekton on Springvale also does not fit under the
second exception set forth in PRG-11.
Conclusion
For the reasons stated above, we conclude that Minnesota law meets
the requirements of a State law for the first exception set forth in
MSA-PRG-11. No facilities were successful on appeal so that the second
exception set forth in PRG-11 is not applicable. The disallowance for
nine of the facilities is unaffected because the time period covered by
the disallowance comes after the running of the twelve month period
following provider agreement expiration. The disallowed amounts for
these facilities total $37,634.27. The disallowance is partially
overturned as to Nekton on Springvale, Nekton on Mississippi, Nekton on
Frost, and Nekton on London. The amount of FFP appropriately paid for
services at these facilities in accordace with our determination should
be calculated by the parties. If the parties are unable to reach an
agreement, the Board will consider an appeal on the amount involved at
that time. /1/ The notification of disallowance did not indicate when
the services were rendered. After consulting both Central and
Regional Offices. The attorney of HCFA has stated that the services were
rendered during the quarter in question. The attorney for the State was
informed of this by telephone and has not disputed it. /2/ In a
telephone conversation on August 4, 1981, the attorney for the State
notified the Board that this is the current name of the facility called
Nekton on 49th Street in the notification of disallowance. /3/ The
language of this provision replaced different language in 1975
which conveyed the same principle but specifically included wording in
the body of the section that the pre - final decision was a "proposal
for decision." /4/ According to the American Heritage Dictionary
of the English Language, for example, to "propose" is to "put
forward
for consideration, discussion, or adoption; suggest." /5/ Question #1:
Is the intent of paragraph 11-5211 to require that the interior
stairway leading down from 2nd floor be enclosed and provide for direct
exit discharge at ground level? Question #2: Is the intent of the
Committee that the interior stairway need not be enclosed if the path of
exit travel does not transverse the open stairway? Question #3: Is it
the intent of the Committee that the interior stairway need not be
enclosed if an outside stair escape is provided from the 2nd floor
level? Question #4: Is it the intent of the Committee that the
sleeping rooms be provided with two stair-type exits from the 2nd floor?
Question #5: Assuming that the answer to question #4 is No, is it the
intent of the Committee that the Code allow a single dead end type means
of exit access (which includes bedroom corridor and stairway) from 2nd
floor and down to two exits located at 1st (ground) floor level?
Question #6: Is it the intent of the Code that the referenced
requirements in Section 11-6 for 1- and 2-family dwellings are
considered additional requirements and not to be used as optional
standards for substitution in Section 11-5 for lodging or rooming
houses? Question #7: Assuming that the answer to question #6 is YES,
is it the intent of the Committee that paragrah 11.5212 not permit
windows to qualify as an approved second exit for 2nd floor sleeping
rooms in lodging and rooming houses? (id., Exhibit 4.)
OCTOBER 22, 1983