GAB Decision 616
December 31, 1984
New York Department of Social Services;
Garrett, Donald F.; Settle, Norval D. Teitz, Alexander
Docket No. 83-231
The New York Department of Social Services (State) appealed a
disallowance of $7,103,322 by the Health Care Financing Administration
(HCFA, Agency). The claims disallowed were for costs incurred by 67
intermediate care facilities for the mentally retarded (ICFs/MR) for
periods from 1980 through 1983. The disallowance was based on 42 CFR
442.105, which contains standards for certifying facilities which have
deficiencies for the Medicaid program. The Agency found that the State
did not have documentation to show that the facilities met these
standards.
We find that none of the 67 facilities met the requirements for
certification under 42 CFR 442.105(a). The Agency therefore properly
found the related provider agreements invalid under the so-called
"procedural look-behind" authority of 42 CFR 442.30. We also find
that
58 of the 67 facilities did not meet the requirements for certification
under 42 CFR 442.105(c) and (d), the so-called "repeat deficiency
requirements," although this does not affect the disallowance since none
of the facilities met 42 CFR 442.105(a). We therefore uphold the
disallowance in the full amount. /1/
Background
Certification of facilties with deficiencies
The Medicaid program under Title XIX of the Social Security Act is
administered by the states, and partially funded by the federal
government. In the case of ICFs/MR, as well as other ICFs, a facility
must enter into a provider agreement with the "single state agency"
in
order to participate in the Medicaid program and be reimbursed from
federal funds. Before a provider agreement is signed, the facility has
to be "certified" by the state survey agency as meeting the required
federal standards.
(2) In the case of an ICF/MR, it must meet the standards for all ICFs
in Subpart E of Part 442 of 42 CFR. /2/ In addition, it must meet the
standards in Subpart G for ICFs/MR (sections 442.400 through 442.516).
Many of these sections are broken down into several subsections, so that
according to a State witness, there are approximately 115 separate
standards, with 600 elements. (Tr., August 9, p. 156) In the regulation
no distinction is made between the standards as far as priority of
compliance.
When a state survey agency is satisfied that a facility either meets
or expects to meet the various standards (to be discussed below in
connection with plans of correction) the head of the survey agency signs
a Certification and Transmittal Form (known as a C&T) and transmits it
to the single state agency. Not until then may the single state agency
execute a provider agreement with the facility.
But even the execution of a provider agreement may not be enough for
the facility to continue to participate in the Medicaid program. HCFA
may "look behind" the provider agreement and refuse to pay any FFP
for
the particular facility if the State failed to follow the proper
procedures in certifying. This case involves the so-called "procedural
look-behind." /3/
The regulations have certain specific requirements for certifying a
facility with deficiencies. If a facility cannot meet a particular
standard at the time it is surveyed, it may submit a plan for correcting
the deficiency by a certain date. The state survey agency must find
acceptable the written plan for correcting the (3) deficiencies. 42 CFR
442.105(b). This provision is not at issue here. The survey agency
must find that the facility's deficiencies do not jeopardize the health
and safety of the patients nor seriously limit the capacity of the
facility to give adequate care. The survey agency is also required to
maintain a written justification of these findings. Section 442.105(a)
(hereafter referred to as the 105(a) requirement).
There is no guidance in the regulations, or in any instructional
material given the states, as to just where and how this "written
justification" is to appear. It is the State's position that the
signature on the C&T form by the head of the state survey agency
certifying a facility with deficiencies by accepting a plan of
correction in and of itself constitutes the written justification for
the action.
The other subsections of section 105 at issue here are the so-called
"repeat deficiency" requirements. 42 CFR 442.105(c) and (d). When
a
facility is certified in one year with deficiencies, there are special
requirements when it still has some deficiencies the next time around
that it is surveyed. The regulation has different requirements if the
deficiencies are the same ones that came up in the prior survey, or
different ones.
If the facility has different deficiencies at the second survey, the
survey agency must document that the facility was unable to stay in
compliance with the particular standard "for reasons beyond its
control," or "despite intensive efforts to comply," and, in addition,
is
"making the best uses of its resources to furnish adequate care"
(hereafter referred to as the 105(c) requirement).
If the facility has the same deficiency as it had under the prior
certification, then the survey agency must document three separate
items. The facility must have achieved compliance with the particular
standard at some time during the prior certification period; it must in
the judgment of the survey agency have made a good faith effort to stay
in compliance; and it must have again come out of compliance "for
reasons beyond its control" (hereafter called the 105(d) requirement).
The Agency's has twice moved to rescind the repeat deficiency
regulation, the first time accompanied by statements of its own highly
critical of the regulation. It has remained in effect, however.
(4) Another separate aspect of the regulatory scheme for certifying a
facility with deficiencies is the automatic cancellation clause. 45 CFR
442.111(c). The certification will provide that it will automatically
be cancelled on a date certain, which cannot be more than sixty days
after the last day specified in the plan for correction of deficiencies
under section 105. This automatic cancellation may be rescinded if the
survey agency finds that the facility "has made substantial progress in
correcting the deficiencies," and also, that the facility has a "new
plan for correction" that is acceptable.
The State, as part of its argument here, contended that when the
survey agency resurveyed and rescinded an automatic cancellation date in
writing, this amounted to the documentation required for repeat
deficiency certification under 105(c) and (d).
Analysis
I. THE ISSUE HERE IS PROCEDURAL LOOK-BEHIND.
It has been the contention of the State since the beginning of this
controversy that the Agency is in effect exercising substantive
look-behind authority here, rather than procedural look-behind. If it
is substantive look-behind then the State argues that the disallowance
is improper for several reasons. These reasons are substantially as
follows:
A. The substantive look-behind authority authorized by statute did
not come into existence until December 5, 1980 and cannot be applied
retroactively;
B. The notice required to be given the facilities under the statute
was not given in this case.
The procedural look-behind authority has been in effect since 1974.
The substantive look-behind authority did not go into effect until
December 5, 1980, the effective date of Pub. L. 96-499, the Omnibus
Reconciliation Act of 1980. According to the State, the "great
majority" of the facilities in question "were certified and recertified
as ICFs/MR by the State prior to that date." (Memorandum in Support of
Appellant's Position, p. 11)
The State contends that the statute providing for substantive
look-behind could not under general principles of administrative law be
applied retroactively to certifications and recertifications (5) prior
to the effective date of the statute. We do not reach the question of
retroactive application of the statutory look-behind authority because
we find that the disallowance here was based on the procedural
look-behind authority of HCFA.
A. The disallowance letter
The Agency has always cited the procedural look-behind regulation as
the basis for its disallowance of FFP for the 67 facilities. The first
formal notice that no FFP was available for the facilities for stated
periods was in the letter of May 19, 1982 from HCFA to the Commissioner
of the New York Department of Social Services. (Shulman to Blum, Ex.
4) This letter stated simply that the provider agreements "are invalid
pursuant to 42 CFR 442.30."
The detailed disallowance letter dated September 16, 1983 from HCFA's
Regional Administrator to New York's then Commissioner relied on 442.30,
together with 105(a)(c) and (d). (Toby to Perales, Ex. 5) The Agency's
position has been consistently that it was proceeding under its
procedural look-behind authority, and FFP was disallowed here because
the State did not follow the proper procedures in 105(a), (c), and (d)
when it certified the facilities with deficiencies.
The State referred to the December 12, 1980 letter from HCFA's
Regional Director of the Bureau of Health Standards and Quality to New
York's Commissioner of the Office of Mental Retardation and
Developmental Disabilities (OMRDD) (Saperstein to Introne, Ex. 1) as the
Agency's "initial notice of disallowance," (State's post hearing
memorandum, p. 7) In this letter the Agency referred to "10 key
indicators which represent requirements that we believe are elemental to
a functioning ICF/MR." (Exhibit 1, p. 3, emphasis in original) It is the
State's contention that by using "10 key indicators" HCFA based its
decision to deny federal funds "upon its judgment of which standards had
to be met for participation," and was thus exercising substantive
look-behind. (State's post hearing memorandum, p. 7)
There is nothing in this letter which says it is a disallowance.
Just before the end of the letter HCFA asks for a meeting as soon as
possible to discuss the situation. The State is urged to consider a
moratorium on future certifications pending the meeting "to avoid
compounding a potentially far reaching Federal Financial Participation
action." (Exhibit 1, p. 7) This language certainly is not any "notice
of
disallowance."
(6) The actual notice of disallowance /4/ was dated September 16,
1983, and was from Toby (HCFA Regional Administrator) to Perales (then
Commissioner of the single State agency). The letter began as follows:
Your department was notified by a letter dated May 19, 1982 of our
decision to disallow claims for 67 small Intermediate Care Facilities
for the Mentally Retarded (ICFs/MR) for various time periods. Our
decision to disallow these claims was based upon our . . .
determination that the provider agreements of these 67 facilities were
invalid pursuant to 42 CFR 442.30. . . .
The letter then states that under section 442.30 a provider agreement
is not valid evidence that a facility has met the requirements of
Medicaid participation if "the Administrator determines that (a)(2) the
survey agency failed to follow the rules and procedures for
certification set forth in Subpart C. . . ." (Exhibit 5, p. 1)
The disallowance letter sets out in full the provisions of 45 CFR
442.105(a), (c), and (d). Then it breaks down the deficiencies by type.
In all 67 facilities, says the Agency, the State certified the ICFs/MR
"despite the evidence of serious deficiencies." (Id., p. 2)
The State relies on these words to argue that "(A) substantive
judgment has been made, after the fact itemizing 'serious
deficiencies.'" (State's memorandum, p. 17) In arguing that this is
"substantive" look-behind, the State overlooks entirely the rest of
the
sentence in the Regional Administrator's letter, that the certification
of the facilities was also:
absent a written justification of a finding that such deficiencies do
not seriously limit the facility's capacity to give adequate care.
(Exhibit 5, p. 2)
Thus the disallowance letter gives part of 105(a) verbatim as a basis
of the disallowance. The use of the words "despite the existence of
serious deficiencies" is not an attempt to exercise (7) a substantive
judgment of what is or is not serious. The Agency is simply questioning
how the survey agency could find that these "serious deficiencies"
did
"not jeopardize the patient's health and safety," under 105(a).
The rest of the disallowance letter is clearly an exercise of the
Agency's look-behind authority under 442.30, by applying the procedural
requirements of section 105. The letter states that 105(c), which
requires that the survey agency must "maintain certain documentation for
facilities with deficiencies at recertification which are different than
those on the previous certification," was not followed in 17 cases. The
disallowance also states that 105(d), which requires that the survey
agency must "maintain certain documentation for facilities which have
the same deficiencies at recertification which they exhibited at the
prior certification," was not met in 60 cases. /5/ Attached to the
letter was a listing of each of the 67 facilities. After every facility
was an "a." In addition each facility had after it a "c"
or a "d" or
both.
It is therefore clear that the Agency was exercising only procedural
look-behind. It really conducted a paper drill; it examined the survey
and certification records to see if they showed that the survey agency
had followed the proper procedures. For the purpose of this
disallowance it did not attempt to second-guess the State surveyors on
what deficiencies actually existed, or whether the plans of correction
submitted for the deficiencies were adequate. Even the letter from
Saperstein to Introne which first referred to the "three critical
regulatory requirements" (Exhibit 3, July 22, 1981) states that it was
based upon "an analysis of the survey and certification documentation
provided by your (OMRDD) office." (Id., p. 2)
The State's argument that the Agency was exercising substantive
look-behind while calling it procedural look-behind would be more
plausible if the disallowance were not based on section 105. If the
actual disallowance said that the provider agreements for the 67
facilities were invalid because the facilities failed to meet certain
specific standards in the regulations, then there might be a basis for
the State's position. If the Agency attempted to decide on its own
whether the facility met one of the three "critical regulatory
requirements" or any one of the numerous (8) standards in 42 CFR Part
442, then it is certainly arguable that the Agency engaged in
substantive look-behind. But despite the preliminary correspondence,
this is not what the disallowance had as its basis.The disallowance said
the provider agreements were invalid because the required justification
under 105(a) and the necessary documentation under 105(c) and (d) was
not in the records.
The fact that the Agency screened the survey and certification
records for only ten "key indicators" or three "critical requirements"
instead of the hundreds of standards in the regulations could work only
to the benefit of the State. It meant, for instance, that if there were
facilities which had deficiencies in other standards than those used for
screening, they could escape disallowance although not meeting the
requirements of section 105.
B. The Agency did not have to meet the requirements for substantive
look-behind.
Our finding that the Agency did not use substantive look-behind as
the basis for its disallowance answers several arguments made by the
State. If there was no substantive look-behind exercised then there is
no retroactivity question. The procedural look-behind regulation was in
place long before the period of time at issue here.
The notice and comment requirements of the Administrative Procedure
Act (5 U.S.C. 551 et seq.) are not at issue. HCFA did not apply the
"ten key indicators" or the "three critical regulatory requirements"
as
the basis for the disallowance, so there was no need to publish them.
Under substantive look-behind the facilities themselves are entitled
by the statute to notice and an opportunity for a hearing and judicial
review. The action here under procedural look-behind was properly in
the form of a disallowance of FFP against the State, rather than against
the facilities. No separate notice to them was required.
II. THE MEMORANDUM OF UNDERSTANDING IS NOT IN ISSUE.
In April 1981 a Memorandum of Understanding (MOU) was entered into
between the State and HCFA Region II. (Exhibit 2) The State was acting
through its Department of Social Services, Department of Health, and
OMRDD. In addition to the general provisions pertaining to
certification based on federal regulations and plans of correction, the
agreement listed on an attachment 13 regulatory requirements which had
to be "in actual compliance in order for a (9) facility to be initially
certified or recertified." This was an agreed modification of the ICF/
MR requirements which do not themselves differentiate between standards.
Without the MOU the State survey agency could accept a plan of
correction for any deficiencies provided that the requirements of
105(a), (c) and (d) were met. The MOU changed that, but not for the
past.
The State and the Agency agreed to be bound by the MOU, but it was
not retroactive. Paragraph 10 is the disclaimer:
This Memorandum of Understanding is without prejudice to the position
of the parties with regard to the legal or factual sufficiency of
surveys performed and certifications issued prior to its effective date.
The Agency thus reserved its rights to question any state surveys and
certifications prior to the effective date of the MOU. An examination
of the addendum to the disallowance (Exhibit 5) shows that each of the
67 facilities had an original provider agreement with a beginning date
prior to the effective date of the MOU. The signing of the MOU
therefore did not preclude the Agency from exercising procedural
look-behind on provider agreements signed earlier.
The Agency also took the position that after the MOU was signed it
could still take a disallowance based on failure of later surveys and
certifications to meet the requirements of section 105. This was
presumably the basis for the inclusion in the addendum to the
disallowance letter of four facilities where the period of the invalid
agreement runs from a date in 1980 to "Present (6/30/83)." (See Tr.
August 10, pp. 65-68) The MOU did not preclude such an application of
section 105 in the future, since paragraph 5 provided as follows:
Certification shall be based upon adherence to all Federal ICF/MR
regulations and the correction of deficiencies through the
implementation of an approved plan of correction is recognized as the
basis of program participation.
Therefore the execution of the MOU did not affect the right of the
Agency to exercise procedural look-behind and invalidate provider
agreements, based on violations of 105(a), (c), or (d), in surveys and
certifications either before or after the MOU. The major difference the
MOU made was that the thirteen requirements in the attachment to the MOU
had to be met by actual compliance, rather than plans of correction
under section 105. Since the disallowance was based entirely on failure
to meet the requirements of section 105, the MOU is not an issue in this
appeal.
(10) III. THE STATE CERTIFIED ALL 67 FACILITIES WITHOUT MEETING THE
REQUIREMENTS OF 42 CFR 442.105(a).
The regulation's requirements are clear. If a survey agency finds a
facility deficient in meeting the standards of Part 442, it may still
certify the facility for Medicaid purposes under certain conditions:
(a) The agency finds that the facility's deficiencies, individually
or in combination, do not jeopardize the patient's health and safety,
nor seriously limit the facility's capacity to give adequate care. The
agency must maintain a written justification of these findings.
The survey agency must therefore do two things under 105(a) before
moving on to 105(b), which pertains to finding acceptable a facility's
written plan for correcting the deficiencies. The survey agency must
under 105(a) first make a finding that whether there is one deficiency,
or there are a hundred, there is no threat to the health and safety of
the patients, and the facility's capacity to give "adequate care"
is not
seriously limited.
There can be no argument about the reasonableness of such a
condition. Of course the health and safety of the patients is the
primary concern. If a facility cannot meet this requirement it should
not receive federal funding. Similarly, if a facility is not able to
give "adequate care" the federal government should not be expected
to
contribute to its costs.
The State does not question the reasonableness of the requirement; it
claims it met it as to all the 67 facilities. Anthony DiNuzzo /6/
claimed that no facility was ever certified if it did not meet these
requirements. The difficulty comes with the last sentence of 105(a)
which requires the survey agency "to maintain a written justification of
these findings."
(11) Mr. DiNuzzo testified categorically that he did not sign any C&
T where he felt the health and safety of the client was in danger, (Tr.,
August 9, p. 118) or where the facility in his judgment was severely
limited in its capacity to give adequate care. (Id., p. 119)
The critical point in the next question and answer:
Q. Okay. And lastly, the requirement for -- what is it called, a
written justification?
A. Yes.
Q. Was there a plan of correction -- a statement of deficiencies and
a plan of correction provided for in each of those cases?
A. Yes, there was.
Q. And was that supplied to the Federal Government?
A. Yes, it was.
(Tr., August 9, p. 119)
This testimony confuses the requirements of 105(a) and (b). After
the survey agency finds that the deficiencies are not life-threatening
and do not seriously limit giving adequate care under (a), then, and
only then, do we consider whether there is an acceptable plan of
correction of the deficiencies under (b).
In cross-examination the State witness recognized this difference.
Yes, if we did a survey and there were what we considered to be
life-threatening deficiencies, then a plan of correction route would not
have been appropriate. . . .
(Tr., August 9, p. 147)
The witness nevertheless continued to rely on the plans of correction
as the answer to the written justification required in (a). (Id., pp.
147-48)
Finally, he admitted that there was no specific separate written
statement of the finding required by (a).
(12) Q. If I understand your testimony, then, aside from the fact of
the Statement of Deficiencies and the Plan of Correction, there was no
separate analysis or statement as to why facilities were being
recertified.
A. There was a separate analysis, but if you're looking for a
statement where, on every package, I said I hereby attest that the
facility does not have any life-threatening conditions, I can't honestly
say that I ever wrote that.
(Tr., August 9, p. 162)
Unfortunately for the State, what Mr. DiNuzzo never wrote is what the
regulation requires. The further statement, that "I think it's implicit
in our application to certify that those conditions do not exist," (Id.)
does not meet the requirement either. The regulation requires not only
the findings, but that the survey agency "must maintain a written
justification of these findings." The good-faith belief that the
facilities met the requirements of (a) is not enough. Accepting
testimony of this witness that he would never certify a facility that
did not meet (a) still does not meet the requirement that there be a
written justification of the findings.The Board has in fact said that
the written justification must be contemporaneous and not after the
fact. /7/
The State's own testimony shows that the facilities were certified
without there being a written statement in the files that the
deficiencies were not life-threatening and did not seriously limit
adequate care. There is no evidence of any written justification
required by the regulation, so we must find that certification of all 67
facilities was in violation of 105(a). Therefore the provider
agreements were invalid and the disallowance must be upheld on this
ground alone.
IV. THE STATE CERTIFIED 58 OF THE 67 FACILITIES WITHOUT MEETING THE
REQUIREMENTS OF 42 CFR 442.105(c) OR (d).
(13) We have found above that none of the 67 ICFs/MR met the
requirements of 105(a) for certification. Strictly speaking, it is not
necessary to go beyond that, because if a facility does not meet (a) it
cannot be properly certified, whether or not it meets (c) or (d). Mr.
DiNuzzo admitted this.
If a facility is out of compliance with (a), I really think the other
stuff is secondary because . . . if they're out with (a), they would
never even have a chance to get a repeat deficiency because they would
have been terminated on the first survey under (a).
Tr., August 9, 1984, p. 194.
We have nevertheless decided to consider the repeat deficiency issue
because the parties devoted so much time and effort to it. As with
105(a), the reason for the disallowance was not failure to comply with
any particular standard, but the lack of documentation. Section 105(c)
deals with different deficiencies in two surveys. To be certifiable,
there must be documentation that the facility was unable to stay in
compliance with the standard between the two surveys "for reasons beyond
its control, or despite intensive efforts to comply." In addition, the
facility has to be making "the best use of its resources to furnish
adequate care."
For the same deficiencies in two successive surveys the requirements
in 105(d) are stricter. There must be documentation that there was
actual compliance at some time between the two surveys; in addition,
the facility must have made a good faith effort to stay in compliance,
and again became out of compliance for reasons beyond its control.
The State's contention that no facilities were certified in violation
of (c) of (d) is based on the inspections or surveys between the first
and second certifications. The State relied on Exhibits 15 through 17
for this position. These forms, submitted in blank as exemplars, were
respectively "Statement of Deficiencies and Plan of Correction,"
"Post-Certification Revisit Report," and "Summary of Deficiencies
Not
Corrected." The State argued that in each case where a facility was
certified with a repeat deficiency, these forms alone would meet the
requirements of (c) and (d). For example, Exhibit 17 has a space for
showing that where a deficiency was not corrected, "acceptable progress
or effort" was shown. There is a space for describing the provider's
efforts and to give a new plan of correction and completion date.
The Agency's response was that these forms used on a revisit between
certifications were properly used only in connection with rescinding an
automatic cancellation date under 42 CFR 442.111.
(14) Under that section a facility may be certified with deficiencies
if there is a condition for automatic cancellation on a certain date.
The cancellation does not take place even if the deficiencies have not
all been corrected by that date, if the facility has made substantial
progress in correcting the deficiencies and has a new plan for
correction that is acceptable. The Agency argued that to meet (c) and
(d) you had to do something more than show progress and have a new plan
of correction.
The actual files showing the various surveys and certifications were
not introduced in evidence, although they were available at the hearing.
The documentary evidence on the repeat deficiencies included one exhibit
by each of the parties. Respondent's Exhibit D was a summary of the
results of a first and second survey for each of the 67 facilities,
screened against 10 particular regulatory requirements.
The State's Exhibit, Appellant's Exhibit 20, was a "summary of the
surveys of the 67 small facilities currently the subject of a federal
disallowance." It was a summary of the first and second surveys
indicated in Exhibit D, and any intervening surveys. Column one
represented the facilities which had a deficiency (one of those used for
screening) in only one of the two surveys. Column two showed different
deficiencies in the two surveys, or an apparent 105(c) violation.
Column three had the same deficiency in both the first and second
surveys, but where an intervening survey found compliance. Column four
listed those facilities "which did not achieve compliance during the
subject period." /8/
There is no serious dispute here as to 62 of the 67 facilities. Nine
facilities did not have repeat deficiencies and 53 were certified in
violation of (d).
The nine facilities which did not have either the same or different
deficiencies in both the first and second surveys are those listed in
the first column of Exhibit 20. The Agency at first claimed (15) that
while its own Exhibit D did not show repeat deficiencies for these
facilities, this Exhibit was only a summary and repeat deficiencies
could be found in the files. Eventually the Agency conceded that there
was no reason to find these nine facilities in violation of either (c)
or (d), and the Agency would proceed only on violations of (a).See
Agency's Post Hearing Memorandum of Law, p. 5, and p. 13, n. 2.
Similarly, the State eventually conceded that the 53 facilities in
the last column of its Exhibit 20 did not meet (d). This Exhibit's
cover letter states that "Column four indicates those facilities which
did not achieve compliance during the subject period." One of the
requirements of (d) is that a facility come into compliance between the
two surveys. We do not rely entirely, however, on the State's own
exhibit. At the hearing Mr. DiNuzzo eventually admitted that these 53
facilities in the fourth column of Exhibit 20 could not meet (d).
Q. Could I infer from this chart that you would be admitting that
for the facilities that have check marks in the fourth column, that
there is not evidence in the files to show that they met all the parts
of 105(d)?
A. Yes, I don't think there is enough evidence in there to support
that they met all the parts of 105(d). . . .
(Tr., August 9, p. 201)
This leaves only five facilities where there is any contest as to
repeat deficiencies. Two of these are in column two of Exhibit 20, and
three in column three. The second column is headed 442.105(c); the
cover sheet states that it shows facilities "whose deficiency(s) in the
second survey were not the same as those found in the first survey."
These facilities would therefore not meet (c) unless there was
documentation that there was not only effort to compoly but that the
facility "was making the best use of its resources to furnish adequate
care." Neither a plan of correction nor removing or extending the
automatic cancellation date on a revisit is documentation of this
specific requirement.
The same State witness admitted that there was no such definite
documentation. He was questioned as follows:
Q. Let me also make sure that I understand your position as, let's
say, 105(c).
(16) As a lay person looking at a State file on a facility, would I
be correct in saying that if I were to look through one of the files .
. . I wouldn't know specifically from looking at that file, that there
was a finding, for instance, that the facility weas making the best use
of its resources to furnish adequate care except by implication by the
fact that you accepted the plan of correction. . . .
(Tr., August 9, p. 194)
The witness then gave a long answer, but the first sentence of his
reply answered the question: "Yes, I think you summed it up quite
well." (Id., p. 195) His long attempted explanation that there was no
particular form for documenting the requirement of (c), and he would not
know where to put the documentation, did not change the admission that
there was in fact no documentation which met the specific requirements
of (c). We therefore find that the three facilities in column two of
Exhibit 20 were certified in violation of 105(c).
This leaves undecided only the three facilities in column three of
Exhibit 20. The column heading is "442.105(d)." The cover letter states
that these were facilities "where the deficiency(s) were the same in
both the first and second surveys but where an intervening survey found
compliance." This does not technically meet the requirements of 105(d).
A facility must not only have come into compliance between the two
surveys but have made a good faith effort to stay in compliance, and
then fallen out of compliance again for reasons beyond its control.
The State contended that weight should be given to the
post-certification visits which rescinded automatic cancellation dates
on the basis of "acceptable progress or effort shown." Even if we
were
to equate this with the good faith effort to stay in compliance required
under (d), there is no documentation to show that these facilities again
fell out of compliance for reasons beyond their control.
We therefore find that the 53 facilities in column four of Exhibit 20
did not meet (d); the three facilities in the third column also did not
meet (d); and the two facilities in the second column did not meet (c).
The nine facilities in the first column had no repeat deficiencies. In
summary, 58 of the 67 facilities were improperly certified with repeat
deficiencies.
(17) V. THE REPEAT DEFICIENCY REGULATION IS VALID AND ENFORCEABLE.
The State's position is that the Agency cannot in any event take a
disallowance for violation of the repeat deficiency regulation because
the Agency was not enforcing the repeat deficiency requirement and
sought its repeal. The State has made this argument before. In New
York State Department of Social Services, Decision No. 481, November 30,
1983, we found that the Agency was not arbitrary and capricious in
attempting to enforce the repeat deficiency regulation. We considered
there the proposed elimination of the repeat deficiency regulations,
with the Agency's comments in the Notice of Proposed Rulemaking that the
repeat deficiency requirements were "overly mechanistic, expensive and
unnecessary." (New York, p. 3, n. 1)
The Agency has issued another notice of proposed rulemaking to
eliminate (c) and (d) of section 105. However, this proposal was to
eliminate the entire section 105, not merely the repeat deficiency
provisions. (47 Fed. Reg. 23408, May 27, 1982) This proposal in and of
itself adds nothing to what was before us in Decision No. 481.
There is also the testimony of Mr. DiNuzzo to consider, as to the
Agency's policy on repeat deficiencies. He was an employee of the
Agency central office before he went to work for the State of New York.
In fact, he was apparently recruited by New York for surveying ICFs/MR
because of his training in federal requirements.
His testimony on the central office attitude toward the repeat
deficiency clause was as follows:
It was the general view of everyone in Central Office, and this view
was conveyed to the regional offices as well, that the repeat deficiency
clause of the regulations was, in essence, unenforceable because it did
not lay out the importance of certain standards over others and that no
matter how insignificant a deficiency was, if it was repeated on two
consecutive surveys the way the regulation was written, it would be
required to be implemented as a non-renewal or decertification type of
recommendation.
(Tr., August 9, p. 131)
(18) The State witness went on to describe the notice of proposed
rulemaking and continued:
Based on that Notice of Proposed Rulemaking, and prior to that, based
on comments from legal office in Washington, the Office of Long Term
Care, Office of Nursing Home Affairs, notified, at least verbally, --
and there might have been a policy circular on it also--to the regional
offices that in essence, that the instructions were not to close
facilities simply on the basis of repeat deficiencies.
(Id., p. 132)
This testimony was contradicted, at least as to Region II, by the
Regional Director of Survey and Certification Operations for the Agency.
She was questioned by the Board as follows:
Q. Has HCFA then continued to invoke the provisions of the
regulation which it has once or twice sought to rescind?
A. As far as I know. In my region we have, and I am assuming that
the other regional offices are doing the same.
Q. Has there ever been in the regions a discussion about whether the
provisions should be used in view of the proposed revocation?
A. None that I have been party to.
(Tr., August 9, pp. 72-73)
The Board is bound by all applicable laws and regulations. 45 CFR
16.14. The notice proposing to rescind the repeat deficiency regulation
did not render it void. It may seem strange that the Agency persisted
in using a regulation with which it was so unhappy. But it is not for
us to decide whether this was wise. We have nothing from the Agency
which stated in writing that the regions should not enforce the repeat
deficiency regulation. We cannot find, on the State's testimony alone,
that it was ever official policy, by those authorized to make policy,
that the repeat deficiency regulation should not be enforced. With a
valid regulation on the books, we canot disregard it because of possible
oral instructions not to use it.
(19) VI. THE NOTICE OF DISALLOWANCE WAS LEGALLY ADEQUATE.
There was only one actual notice of disallowance by the Agency, that
of September 16, 1983. This not only identified the regulations which
the 67 facilities were alleged not to meet but set them out in full.
The addendum listed the facilities with sufficient identification. It
also specified which facilities the Agency claimed were certified
without meeting 105(c) and which did not meet (d). In some instances,
both (c) and (d) were considered as not met. All facilities were
charged with not meeting (a). The addendum also gave the periods of
time for the provider agreements claimed to be invalid by virtue of the
look-behind regulation.
The State claims that the prior "Notices" were contradictory in
their
reference to the regulations. The letter of July 22, 1981 (Exhibit 3)
does not refer to 105(c). But this letter was not the disallowance.
The actual notice of disallowance was clear on what regulatory
requirements the facilities did not meet. This is not a case where the
Agency changed its grounds for disallowance while the appeal was pending
before us. The same grounds first used in the disallowance have been
relied on throughout the proceeding.
In this connection, the State refers to the fact that while the
disallowance letter listed all facilities as being in violation of
either (c) or (d), Exhibit D showed nine facilities violated neither
provision. This is not a case of inadequate notice. It is a case of
the disallowance being partly wrong and we have so found.
VII. THE EQUITIES.
The State asks us to reverse the disallowance on equitable grounds,
and to consider several matters which have no direct connection with the
case before the Board. For instance, the State's post hearing
memorandum of September 17, 1984 says that New York clearly acted in
good faith, since it was "encouraged, and coerced, by the federal court
and Justice Department to enter the ICF/MR program quickly." (p. 35)
This may be good faith, but it has nothing to do with the merits of this
appeal. Neither has the fact that the State voluntarily entered into
the MOU and agreed to a voluntary moratorium on certifications while
discussions were pending any bearing on the merits.
Similarly, the Board is asked to consider "whether or not the
imposition of a disallowance, at this time, would serve any legitimate
legislative intent." (Post hearing memorandum, October 19, 1984, p. 17)
This too is not for us to decide.
(20) The State expands on its equity arguments in the Conclusion to
this same memorandum:
"Thoroughout this proceeding HCFA has sought to limit the
consideration of the Board to two narrow issues--whether or not HCFA was
imposing "substantive" or "procedural" look-behind and whether
or not
the "documentation" required by 42 CFR 442.105 was provided by the
State
when allegedly requested by HCFA. . . ."
(Id., p. 12)
The Board believes that these two issues are in fact the only ones to
be considered in deciding this case. As the Agency's attorney pointed
out in her opening statement:
(This) case is not about the propriety of New York's plan to take
individuals out of large developmental centers and put them into smaller
sized facilities. . . And it is not about the quality, abilities or
training of the surveyors who surveyed the 67 facilities. The only
thing . . . that this case is about is whether the State agency
responsible for administering the Medicaid State plan in New York
followed the proper procedures when it re-issued provider agreements to
these 67 facilities with deficiencies.
(Tr., August 9, p. 15)
The State raised equitable arguments, in addition to these two
issues. The HCFA forms have no specific place provided for stating
whether a facility meets the requirements of 105(a), (c), or (d).
Nowhere in a regulation, manual, or action transmittal has the Agency
given specific instructions as to the proper format for the required
documentation. There was public notice in the Federal Register that the
Agency proposed to rescind the repeat deficiency regulation because it
was not working out as intended. In fact, the Agency's witness
testified that she had never seen documentation which met the repeat
deficiency requirements. (Tr., August 10, p. 82)
The State asked more than once what it could do which would have been
enough. The Board suggested that there was a "Remarks" block on the
C&T
form. The requirements of 105(a) could arguably have been met by
writing in here words to the following effect: "None of the
deficiencies proposed to be corrected are a danger to health or safety;
facility gives adequate care."
The written justification required by the regulation could also be
placed on a separate piece of paper in the file.
(21) The difficulty is that the State's equitable arguments are
beside the point. They do not bear on the two issues in this case. The
arguments do not provide a legal basis for the State's failure to comply
with the regulatory requirements in question here.
It is not for this Board to say what would in fact be enough. The
regulation requires "written justification" for (a), and "documentation"
for (c) and (d). The record here gives us nothing which even purports
to meet these requirements. All we have for (a) is Mr. DiNuzzo's
testimony that he never certified a facility unless there was no threat
to health and safety. We are bound by the requirements of the
regulation (45 CFR 16.14), and what we have is not enough to meet them.
We are not faced here with a true estoppel issue. Even if the
central office told some regional offices not to enforce the repeat
deficiency regulation, no one told the state surveyors this. There was
no misrepresentation to the State. The notice of proposed rulemaking
was not a statement to the states that the repeat deficiency regulation
did not have to be followed while it remained on the books. Since there
was no misrepresentation, there could be no detrimental reliance. The
requirements for estopping a private party are not met, so we do not
reach the question whether the government could be estopped. See
Heckler v. Community Health Services of Crawford County, U.S. , 104 S.
Ct. 2218 (1984).
CONCLUSION
We uphold the disallowance as to all 67 ICFs/MR because they were
certified without the written justification required under 105(a). We
find also that 56 of the facilities were certified without meeting the
documentation requirements of (d) and two without meeting (c). The fact
that nine of the facilities had no repeat deficiencies makes no
difference in the result because failure to meet (a) means the
certification was improper under 105, and the provider agreements for
those facilities were not valid evidence that the requirements were met,
under the procedural look-behind of 442.30. /1/ The State at the
hearing stated that it was not contesting the computation of the
amount of the disallowance in this proceeding. (Tr., August 10, p. 68)
/2/ The pertinent regulations had no change in substance during the
period covered by the disallowance at issue here. /3/ This
procedural look-behind is different from the so-called "substantive
look-behind," where the Agency acts on the basis of its own on-site
review to determine whether the facility was actually meeting the
federal requirements. In that case the proceeding is against the
facility, rather than the state, and the sanction is termination of the
provider agreement, rather than denial of FFP. (See further discussion
in I below.) /4/ If any prior correspondence was in fact a
disallowance, then the State's appeal to the Board was untimely. New
York purported to appeal only from the September 19, 1983 notice.
/5/ The number of deficiencies adds up to more than the number of
facilities. This is because some facilities failed to meet both (c) and
(d). /6/ Anthony DiNuzzo, the main witness for the State, was
Director of the Office of ICF/DD (or MR) Survey Operations for OMRDD.
His office was responsible for the survey of all community based ICFs/MR
in New York State. (Tr. August 9, pp. 82-83) The State Department of
Health was responsible for certification but OMRDD did the surveying for
it. /7/ See Mississippi Medicaid Commission, Decision No. 504,
January 31, 1987, p. 8; Washington State Department of Social and
Health Services, Decision No. 598, December 4, 1984, p. 2. /8/
Exhibit 20 seems confusing when first examined. The first column is
headed 442.105(a); however, this does not mean that the facilities
listed in this column were admitted by the State to not meet (a). The
front page of the exhibit shows that the first column represents those
facilities which had deficiencies only in the first survey and not in
the second. The reason for the column heading is that the persons
preparing Exhibit 20 concluded that, where there were no repeat
deficiencies, the Agency could have disallowed only for a violation of
(a).
MARCH 19, 1985