Illinois Department of Public Aid, DAB No. 724 (1986)

GAB Decision 724

February 27, 1986

Illinois Department of Public Aid; 
Ford, Cecilia S.; Garett, Donald F.  Ballard, Judith A.
Docket No. 85-145

The Illinois Department of Public Aid (State, IDPA) appealed a
decision of the Health Care Financing Administration (HCFA, Agency)
disallowing $4,111,378 in federal financial participation (FFP) under
Title XIX (Medicaid) of the Social Security Act.  The claims disallowed
were for the cost of services to Medicaid recipients rendered by 21
nursing homes during periods in which the nursing homes allegedly did
not have valid provider agreements.

Title XIX of the Social Security Act authorizes FFP in payments to a
nursing home which has an agreement with a state to provide services to
Medicaid recipients (provider agreement).  In Ohio Department of Public
Welfare, Decision No. 173, April 30, 1981, the Board held that, under 45
CFR 205.10(b)(3) and a December 1971 Program Regulation Guide (PRG-11)
which has never been repealed, FFP is available subsequent to
termination or nonrenewal of a provider agreement when a facility
contests the termination or nonrenewal and by state law or court order a
state is required to continue payments pending the provider appeal.  The
availability of FFP in payments for services to Medicaid recipients
during a provider appeal is limited to a maximum of 12 months from the
end of the term of the provider agreement.  Decision No. 173, at pp.
8-12;  see also Colorado Department of Social Services, Decision No.
187, May 31, 1981;  and Michigan Department of Social Services, Decision
No. 290, April 30, 1982.  The courts have upheld this interpretation in
Michigan Department of Social Services v. Schweiker, 563 F. Supp. 797
(D. Mich 1983) and Colorado Department of Social Services v. Department
of Health and Human Services, 585 F. Supp. 522 (D. Colo. 1984).

In this decision we resolve the parties' disputes about whether the
facilities had valid provider agreements or appeals during certain
periods of time.  The State did not contest the amount of the
disallowance related to eight of(2) the 21. /1/ Additionally, the State
conceded significant parts of the remaining amount of the disallowance,
related to particular time periods for the 13 facilities at issue.

We make no determination concerning the disallowance for one facility,
the South Holland Nursing Home, for which a 4-day disallowance period is
disputed.  Resolution of this dispute would require a decision on the
requirements of 42 CFR 442.105 for a written justification when granting
certification in some instances.  This issue was also raised by the
Agency in East Moline Care Center, Royal Gardens Nursing Home and
Crestwood Terrace.  By agreement of the parties (telephone conference
call, January 17, 1986, confirmed by Agency letter of January 22, 1986),
the Board will sever this issue and allow the Agency to raise it in a
separate proceeding, so that it may be more fully developed.

We have not excluded consideration of disallowances raised by the Agency
at the briefing stage.  Because we find that none of these additional
disallowance periods could be supported by the record, we do not reach
the abstract issue of whether HCFA may raise a disallowance for the
first time in a Board proceeding without any separate notice to the
State. /2/

In this case, we affirm the Agency's disallowance except as noted below,
based upon an application of the following legal conclusions as
indicated in our analysis below:

1.  Illinois state law provides for the continuation of provider
agreements pending appeal of a decision to terminate, and invokes PRG-11
so that FFP is available pending such appeals.(3)

2.  The State is not entitled to FFP under PRG-11 until the date it
issues a notice of termination prior to a provider appeal.

3.  The State is entitled to FFP pending a bona fide provider appeal,
including appeal of the denial of a provider's plan of correction.

4.  The Board will presume that an appeal is pending if it was properly
initiated and has not been withdrawn, abandoned, or dismissed.

5.  The State may certify a facility as of the date an acceptable plan
of correction or waiver request was submitted, and may properly backdate
a provider agreement to that date.

Background

Title XIX of the Social Security Act establishes a medical assistance
program (Medicaid) which is administered by the states and partially
funded by the federal government.  States may claim federal financial
participation (FFP) for services provided to eligible individuals by
facilities which have entered into "provider agreements" with the state.
Before entering into a provider agreement, the state must "certify" that
the facility is in compliance with all federal standards.  Certification
must be based on an onsite survey of the facility, and must be renewed
annually.  Similarly, provider agreements must be renewed annually. /3/

If no deficiencies are found during the survey, the provider agreement
is effective from the date of the completion of the survey or the
expiration of the prior agreement, whichever is later.  42 CFR 442.13.
A state may certify a facility with deficiencies if the facility submits
an acceptable plan of correction or waiver request.  42 CFR 442.101(e),
442.105.  If the facility is certified with deficiencies, the provider
agreement is effective on the date on which the facility submits an
acceptable plan of correction or waiver request.  42 CFR 442.13(c).
Since certification is a prerequisite for a provider agreement, it forms
a test for the existence of a valid provider agreement.(4)

The terms "decertification," "termination of the provider agreement" are
often used interchangeably, since the practical effect of these actions
is similar.  In this decision, we have attempted to use consistent
terminology whenever possible.  We note, however, that our terms may
differ from those found in the record, and should not be interpreted to
exclude those parallel activities cited above.

Analysis

1.  Illinois state law provides for the continuation of provider
agreements pending an appeal of a termination decision, and for
continued payment in non-emergency situations.

In a series of cases beginning with Ohio Department of Public Welfare,
Decision No. 173, April 30, 1981, the Board found that states were
entitled to FFP for payments to facilities pending appeal of the
decision to terminate or not renew provider agreements in some
circumstances.  In the absence of any contrary regulatory statement or
repeal, the Board interpreted a December 1971 Program Regulation Guide,
MSA-PRG-11, and 45 CFR 205.10, promulgated in 1973, to make FFP
available subsequent to a termination or nonrenewal of a provider
agreement when the facility appeals the decision and the state is
obligated to continue the provider agreement in force by state law,
including general judicial precedent, or when the State is under court
order to continue payments to the facility pending appeal.  The
availability of FFP is limited to a maximum of 12 months from the end of
the term of the last provider agreement.

The Board specifically considered whether PRG-11 applied to Illinois
provider appeals in two prior decisions.  Illinois has a two-step appeal
process:  a facility can request an "informal reconsideration" of the
State's initial decision to terminate or decertify.  If the informal
reconsideration is denied, the facility may request a formal hearing.
The Illinois process appears to be designed to maximize opportunities
for development of issues and discussion between the State and the
facility.  See Illinois Department of Public Aid, Decision No. 559,
August 31, 1984 (both stages in the Illinois procedure are part of an
appeal under PRG-11).

In Illinois Department of Public Aid, Decision No. 220, October 21,
1981, the Board engaged in a detailed analysis of Illinois state law
provisions, and determined that an Illinois provider agreement continues
"in full force" under section 1016 of the Illinois Administrative
Procedure Act until a final administrative decision not to renew or
to(5) terminate.  Additionally, the Board found that federal courts in
Illinois, applying state law, have required the State to continue
payments pending a provider appeal, except in an emergency.

In Decision No. 220, the Board also considered the effect of section
12-4.25(A) of the Illinois Public Aid Code.  The Agency argued there, as
it did in this case, that this section made payments during provider
appeals discretionary during the first 120 days of an appeal, such that
FFP should not be available.  The Board concluded that PRG-11, by its
terms, provides for FFP whenever the provider agreement continues in
force, whether or not payment is discretionary (of course, if no payment
were made, FFP would not be available since the State would not have any
medical expenditures to support FFP).  Furthermore, the Board found that
the surrounding statutory context and the judicial precedent in Illinois
effectively limited, in non-emergency situations, the state agency's
discretion to withhold payments.  Decision No. 220, at 3-4.

Since the Agency has offered no new arguments or evidence to refute the
findings in Decision No. 220, we follow that decision in this case.  We
note that the Agency did not allege any emergency situation which would
allow the State to withhold payments to any facilities.  Therefore, we
reject the Agency's argument that FFP is not available for the first 120
days of a provider appeal, because the Agency's argument is contrary to
the language of PRG-11 and the structure of Illinois law.

2.  Notice of Termination is a prerequisite to availability of FFP for a
provider appeal.

Unless the State notifies the provider of its decision to terminate or
not to renew a provider agreement, no FFP is available under PRG-11
since there is no appeal until notice is given.  The State conceded the
time periods prior to the issuance of a notice of intent to terminate
with respect to most of the facilities in this appeal.  For one
facility, however, the State argued that FFP should be available despite
the lack of a notice to terminate or not to renew because the State had
commenced proceedings to revoke the facility's state license to operate.
As discussed below, we reject this argument.

Bartman Nursing Home

The Agency imposed a disallowance upon the State for the period from
June 1, 1982 until September 23, 1983 with respect to Bartman Nursing
Home.(6)

The provider agreement for the Bartman facility expired on May 31, 1982.
No notice of intent to terminate Medicaid provider status was ever
issued by the State.  The State had commenced proceedings to revoke the
facility's state license to operate.  The facility's license to operate
was revoked on May 26, 1982 after notice and opportunity for an
administrative hearing.  The facility then sought judicial review and
the court issued an order staying the license revocation.  Ex. 3.
Further court orders were issued at other stages of the judicial
proceeding.  See Ex. 4.

The State argued that the license revocation proceeding should be
regarded as the functional equivalent of a termination proceeding.
State licensure is a prerequisite to Medicaid certification.  42 CFR
442.201;  42 CFR 442.251.  Therefore, the State argued, by moving to
revoke the facility's license, the State was also challenging the
facility's Medicaid provider status.

Although the end results of a state licensure and a Medicaid termination
proceeding are similar, we disagree with the proposition that a license
revocation proceeding alone can invoke PRG-11.  See Decision No. 559, at
15;  New York Department of Social Services, Decision No. 181, May 29,
1981.  A Medicaid termination may involve different or additional
elements from a license revocation proceeding.  Unless a license
revocation proceeding is unified by state law with a termination
proceeding, a license revocation proceeding does not eliminate the right
of a provider to separately appeal a Medicaid termination.  Thus, the
State's failure to commence termination proceedings could prolong the
facility's Medicaid provider status.

Although 45 CFR 205.10(b) (3) makes FFP available when the State must
continue payments under a court order, we have held that this is a
limited provision which does not apply to court orders which do not
reference Medicaid provider status or specifically direct continued
payment by the State.  Decision No. 181 at 6.  The court orders imposed
in this case reference neither of these items.  Exs. 3 and 4.

Therefore, we affirm the disallowance for the Bartmann facility because
of the State's failure to issue a notice of a decision to decertify the
facility and terminate the provider agreement.  (7)

Dixon Health Center

The Agency imposed a disallowance upon the State for the period from
March 15, 1983 until September 30, 1983 with respect to the Dixon Health
Center.

The provider agreement for the Dixon facility expired on March 14, 1983.
On March 15, 1983, the facility submitted a letter containing revisions
to a February 18, 1983 plan of correction which had been rejected on
March 4, 1983.  Ex. 12.  The State contended that this response was a
request for an informal reconsideration of the State's March 4
determination, which the State contended would invoke PRG-11.

FFP is available under PRG-11 only when the State issues a notice of
proposed termination and the facility appeals.  We find no indication in
the record that the State ever issued a notice of termination to the
Dixon facility.  The State did not provide the March 4 letter rejecting
the facility's plan of correction, and there is no indication that this
letter contained a notice of proposed termination.  The facility's March
15 letter makes no reference to termination, indicating only that the
State's March 4 letter and the response concerned the facility's plan of
correction.  Furthermore, an internal State memorandum, dated June 20,
1983, has a check before a handwritten line referring to a plan of
correction, but no check before a handwritten line referring to
"informal reconsideration." Ex. DD.  This indicates that the State did
not, at the time, consider the facility to be in the process of
appealing a termination action.

Accordingly, we conclude that there was no termination proceeding which
would invoke PRG-11.  Therefore, we affirm the disallowance for the
Dixon facility because of the State's failure to initiate a termination
proceeding.

3. The State is entitled to FFP pending bona fide provider appeals
including appeals of a denial of a provider's plan of correction

As the Board has often held, PRG-11 extends payment of FFP only during
bona fide provider appeals, and not so-called appeals filed merely to
gain time for compliance by the facility.  See, e.g., Illinois
Department of Public Aid, Decision No. 559, August 31, 1984.  The Agency
alleged that several of the facilities in this case were not raising
bona fide appeals.  The State responded by citing the findings of
deficiencies contested by each facility.(8)

Disputes arise because the responses of the facilities to notices of
intended termination, nonrenewal, or decertification do not always fit
easily into the available analytical categories.  The facilities
responded generally that the intended action was not appropriate.  But
some responses are difficult to categorize distinctly as an appeal, plan
of correction, or waiver request.  These responses were hybrids: the
responses contested some elements found deficient in the survey at
issue, and offered corrections of other deficient elements.

When confronted with these hybrids responses, we must rely on the
general proposition that when "a facility takes advantage of a statutory
(or regulatory) appeal, the Board assumes that the facility is primarily
contesting the findings of non-compliance and is not merely seeking time
to achieve compliance." Decision No. 559, p. 10. On the other hand, the
Board will not recognize as an appeal a response which, on its face,
merely offers assurances of future compliance. Such was the case with
the Ora G. Morrow facility in Decision 559, whose response to possible
termination acknowledged that compliance had not been reached at the
time of the response.

In particular, we agree with the State that a facility may initiate a
valid appeal by contesting the State's refusal to accept a plan of
correction.  We also agree that the fact that the State resolved an
appeal by agreeing to accept a plan of correction, or made resolution
conditional on the facility's performance on a later survey, does not
remove an appeal from the scope of PRG-11.  PRG-11 does not contain any
restriction on the manner in which a state may resolve an appeal to be
eligible for FFP.  Furthermore, however an appeal is resolved, the State
is still bound to accord due process to the appeal.

In this case, our decision on this issue applies to the following
facilities as described below.

Karlson Specialized Living Center

The Agency imposed a disallowance upon the State for the period from
August 24, 1982 until July 7, 1983 with respect to the Karlson
Specialized Living Center.

The provider agreement for the Karlson facility expired on August 23,
1982.  The State did not contest the disallowance between August 23,
1982 and October 20, 1982.  On October 20, 1982, the State issued a
notice of intent to terminate and not to renew.  The facility responded
by a letter dated November 10, 1982.  The Agency argued that this
response was untimely, since the State's letter requested a response(9 )
within 15 days of receipt, and argued that the response was primarily a
plan of correction not an appeal.  The Agency also argued that the
appeal was not within PRG-11 since the State resolved the appeal
conditioned on a resurvey.

No evidence has been presented on the time the facility received the
State's letter, so a definitive ruling on whether the response was
timely is impossible.  Although it is possible that the response was
slightly late, the Agency presented nothing to indicate that the State
Agency did not have the authority to extend the deadline, and we defer
to the State's judgement in accepting the response.  There is no
evidence which would indicate an excessive delay, such as the three
month period which the Board indicated it would reject in Decision 559,
at p. 12.  Furthermore, the highly detailed nature of the facility's
response indicates that it was not responding frivolously with intent to
delay the proceedings.  We do not want to discourage states from seeking
detailed communications from facilities.

We further find that the response was a valid appeal.  While the cover
letter to the response speaks of "corrections" taken, the response
contests the decision to terminate.  The facility expressly denied
certain alleged deficiencies, such as the alleged lack of reports on
hearing and vision examinations.  The facility stated that these reports
had been on file during the survey in the facility's nursing office.
Ex. 15, #6.  Furthermore, the response references a plan of correction
submitted prior to the expiration date, and can be seen as an appeal of
the State's denial of certification with deficiencies. Ex.  15, p. 3
(the plan of correction itself is not in the record.) Although the later
certification of the facility was on the results of a resurvey as part
of the April 1983 annual licensure/certification survey, and not on this
appeal, we find that this is an acceptable manner for the State to
resolve appeals.  Exs. 16, 17.  As we discussed above, nothing in PRG-11
conditions FFP on the provider appeal being resolved in any particular
manner.

Therefore, we reverse the disallowance for the period between October
20, 1982 and July 13, 1983.

Miller Nursing Home

The Agency imposed a disallowance upon the State for the period of June
1, 1983 until September 30, 1983 for the Miller Nursing Home.

The provider agreement expired on May 31, 1983.  The State did not
contest the disallowance for the period between May 31, 1983 and July
14, 1983.  The State notified the(10) facility of the decision not to
renew the agreement on July 14, 1983.  The provider responded with
several waiver requests on August 9, 1983.  On September 19, 1983 the
State accepted certain of these requests and denied others.

We find that the facility's response was an appeal even though framed as
a request for waivers of the cited deficiencies.  The facility charged
that some of the alleged deficiencies were merely technical violations
which were adequately corrected by adjustments in operating practices.
The facility also asked for waivers based on the facility's reliance on
prior state approval of facility construction plans intended to cure
structural deficiencies.  Ex. 53.  Although the State granted only some
of the waiver requests, the State concurred in the facility's suggestion
that the facility could assure adequate service with compensatory
operating practices rather than strict technical compliance.  Ex. 19.

Since we find that the facility's response was an appeal, FFP would be
available under PRG-11 for the duration of the appeal.  The September
19, 1983 decision to grant some of the requested waivers and reject
others effectively denied the facility's appeal.  Of course, FFP would
not be available after the denial unless the facility appealed the
denial in the next step of the State's process.  The State provided no
evidence that this occurred here.

Therefore, we reverse the disallowance for the period of July 14, 1983
through September 19, 1983.

Sacred Heart Home

The Agency imposed a disallowance for the period of May 19, 1983 until
September 30, 1983 with respect to the Sacred Heart Home.

The provider agreement expired on May 18, 1983 and the State issued a
notice of intent to terminate on July 26, 1983.  The State did not
contest the disallowance between May 18, 1983 and July 26, 1983.  The
facility responded on August 12, 1983 and requested informal
reconsideration.  Although the facility's response was largely a
compendium of corrections implemented subsequent to the survey and did
not directly contest the survey findings, the corrections cited were
alleged to have been implemented prior to the date the facility was
notified of intended termination.  See Ex. 29.  Thus, the response
indicates that the facility contested the conclusion that it was out of
compliance at the time the State gave notice of its intent to terminate
Medicaid provider status.  We find that this response was a valid appeal
under PRG-11, since PRG-11 refers specifically to appeals of(11) the
termination of a provider agreement, and not to disputes regarding the
surveyor's findings.  While these findings may be involved in a
termination proceeding, there may be other legal or factual bases on
which a facility can contest the termination action.

The facts in this case can be distinguished from the facts involving the
Ora G. Morrow facility in Decision No. 559.  The Board found that the
Ora G. Morrow facility had not corrected all deficiencies and was
requesting more time to come into compliance.  In contrast, the Sacred
Heart Home response alleged that all deficiencies had been corrected
already, and did not indicate that the facility needed more time to come
into compliance.

Therefore, we reverse the disallowance for the period from July 26, 1983
through September 30, 1983.

Starnes Nursing Home

The Agency imposed a disallowance upon the State for the periods of
August 14, 1982 through October 12, 1982 and for December 10, 1982 until
September 30, 1983.  The Agency added in its brief a disallowance for
the period of October 13, 1982 until December 10, 1982.

The provider agreement expired on August 13, 1982.  The State did not
contest the disallowance between August 13, 1982 and October 13, 1982.
On October 13, 1982 the State notified the facility of its intent to
terminate.  The facility responded with a request for informal
reconsideration on October 21, 1982.  Although the Agency initially
accepted, in the notice of disallowance, that the appeal invoked PRG-11,
the Agency later contended, in its brief, that this response was not a
valid appeal since it relied on corrections implemented or anticipated
after the survey upon which the decision to terminate was based.

We find that the facility's October 21 response was a valid appeal. The
facility sought to explain several of the alleged deficiencies, and the
facility alleged that present compliance had eliminated other
deficiencies. Although the State then agreed to resurvey the facility
and did not actively pursue decertification would not have been possible
without further appeal proceedings.

The facility was ultimately decertified by the State, by an order dated
February 7, 1984, effective July 31, 1983.  It is uncontested that this
date determines the end of any appeal period.  Letter from IDPA, dated
January 27, 1986.(12)

Therefore, we reverse the disallowance for the period of October 13,
1982 through July 31, 1983.  We do not need to reach the issue of
whether the Agency can add to the disallowance periods in its briefs
before the Board, since our decision rejects the proposed added
disallowance period on different grounds.

4.  The Board will presume that an appeal is pending if it remains on a
hearing examiner's docket and is not withdrawn, abandoned, or dismissed.

The appeal process is controlled by the states.  PRG-11 recognizes that
states may have independent legal and constitutional obligations to
permit provider appeals.  In policies such as PRG-11, and in its general
lack of guidance to states regarding the appeal process, the Agency has
recognized the primacy of states in the appeal process.  The Board
therefore defers to the judgment, and legal obligations, of each state
to determine whether an appeal is still pending.

The Board has adopted a presumption to implement this policy.  An appeal
will be presumed to continue if it remains on the hearing docket and is
not clearly withdrawn, abandoned, or dismissed.  See Wisconsin
Department of Health and Social Services, Decision No. 276, March 31,
1982.  The Agency has not disputed this presumption, but has argued, in
particular cases, that the appeal was abandoned.

Therefore, we make the following specific findings for these facilities:

Rockford Manor

The Agency imposed a disallowance upon the State for the period of March
9, 1983 through September 15, 1983 with respect to Rockford Manor.  In
its brief, the Agency added the period of December 12, 1982 until March
8, 1983. /4/

The provider agreement expired on December 27, 1982.  Based on an
October 6, 1982 survey, the State issued a notice of intent to terminate
on November 18, 1982.  The facility (13) appealed and a hearing was held
on March 8, 1983.  After the State presented its case, the facility
obtained a continuance.  Subsequently, the facility was resurveyed, and
was recertified on November 16, 1983, retroactive to December 28, 1982.
On May 24, 1984, the facility's appeal was formally dismissed.

The Agency does not dispute that the facility was engaged in a valid
appeal between November 18, 1982 and March 8, 1983.  The disputed period
is between March 8, 1983 and November 16, 1983, during which the Agency
alleged that the appeal had been effectively abandoned.  The Agency also
alleged that the November 16, 1983 certification was improperly
backdated.

The Agency has not offered any clear evidence of dismissal, withdrawal
or abandonment of the appeal.  The Agency contended that the facility
failed to adequately contest the alleged deficiencies because it
requested a continuance instead of presenting its case at the March 8
hearing.  After that, the Agency contended, we should find the appeal to
be effectively terminated.  But the Agency failed to show any formal
sign of dismissal by the State or renunciation of appeal rights by the
facility.  Until that occurred, the State could not terminate payments,
and the facility had a right to maintain its appeal.  We do not consider
a request for a continuance to be tantamount to a concession by the
facility that it had no case to present.  Because we find that the
appeal remained viable, we need not reach the issue raised by the Agency
concerning the possibly improper back-dating of the facility's
certification.

Therefore, we reverse the disallowance with respect to the Rockford
Manor facility.  Since we reject the added disallowance period raised in
the Agency's brief, we need not reach the propriety of that action.

South Shore Kosher Rest Home

The Agency imposed a disallowance upon the State for the periods of
August 1, 1982 until September 29, 1982 and March 16, 1983 until
September 30, 1983 with respect to South Shore Kosher Rest Home.

The provider agreement expired on July 31, 1982.  The State does not
contest the disallowance between July 31, 1982 and September 30, 1982.
On September 30, 1982, the State notified the facility of its intent to
terminate.  The facility initiated an appeal on October 4, 1982.  The
State rejected the appeal for reconsideration on March 16, 1983,
although the State agreed to factor the results of later surveys into
its final decision.(14)

Although HCFA contended that this denial of reconsideration should mark
the end of the appeal, we find that the appeal continued through the
issuance of a formal decision to terminate on July 26, 1983, and at
least until the setting of a hearing date for October 13, 1983.  In
Decision No. 559, the Board expressly recognized Illinois' two-tiered
appeal process as meeting the requirements of PRG-ll.  Under the
Illinois system, denial of a request for reconsideration does not
eliminate a facility's right to a formal hearing on the final decision.

PRG-ll entitles the State to FFP for a maximum of 12 months from the
expiration of the provider agreement pending a valid appeal.  Since the
appeal process was commenced on September 30, 1982, and continued at
least until July 31, 1983, we reverses the part of the disallowance
which relates to that period of time.  FFP is not available under PRG-ll
after July 31, 1983 because the 12-month period from the expiration of
the provider agreement ended on that date.

5.  A State may certify a facility with deficiencies as of the date an
acceptable plan of correction or waiver request was submitted, and may
properly backdate a provider agreement to that date.

With several facilities, the dispute centers on the date upon which an
acceptable plan of correction or waiver request was submitted.  We note
that the lack of clear documentation provided by the State makes an
accurate resolution of these disputes very difficult.  We have
interpreted the documentation provided, and have relied whenever
possible on the State's contemporaneous characterization of each
facility's status.

Crestwood Terrace

The Agency imposed a disallowance upon the State for the period of
November 1, 1982 until September 30, 1983 with respect to Crestwood
Terrace.

The provider agreement for this facility expired on October 31, 1982.
The State did not contest the disallowance for the period between
October 31, 1982 and July 14, 1983.  Based on a Certification and
Transmittal (C&T) form dated July 14, 1983, the State alleged that an
acceptable plan of correction was submitted on July 14, 1983.  The
Agency claimed that the C&T was backdated and that background documents
indicate that the facility did not meet certification requirements until
some later date nearer to September 12, 1983 when the C&T was documented
to be in existence.(15)$% The C&T form dated July 14, 1983 (possibly
written at a later date) indicates acceptance of a plan of correction
submitted on or near to July 14.  But we do not consider this C&T to be
conclusive evidence that the July 14 plan itself was accepted.  Other
strong evidence in the record indicates that the July 14, 1983 plan of
correction was not acceptable for purposes of certification.  A
handwritten notation (apparently by a state reviewer) on the July 14
plan indicates disapproval and refers to a revised plan of correction.
Ex. 50.  On July 20, 1983, the Crestwood Terrace administrator submitted
a responsive revision to the facility's plan of correction.  Ex. U.
This would not have been necessary if the July 14 plan had been
accepted.

We find that the documentation supports a decision that certification
was proper after the submission of the July 20 revision.  We rely on the
apparent state acceptance of a plan of correction submitted in July.
The Agency relied on an August 9, 1983 C&T which indicates that the
facility was not presently certifiable.  Ex. U.  But that C&T does not
appear to be complete and cannot be given conclusive weight.  It is not
cross-referenced to any survey and does not clearly deny any plan of
correction.  It provides no reason why we should not credit the State's
later acceptance of a July plan of correction.

Thus, we affirm the disallowance for the Crestwood facility, with the
exception of the period between July 20, 1983 and September 30, 1983,
when we find that the facility was certified with deficiencies and had
an acceptable plan of correction.  As stated above, this decision does
not preclude the Agency from reopening the issue of compliance with the
requirements of 42 CFR 442.105(a).  See, , infra, p. 3.

Diplomat Health Care

The Agency imposed a disallowance upon the State for the period of
November 1, 1982 through September 30, 1983 with respect to Diplomat
Health Care.  Diplomat was a dually certified facility, operating both
as a skilled nursing facility (SNF) and as an intermediate care facility
(ICF).

On June 9, 1982, prior to the November 1, 1982 expiration of the
provider agreement, the State notified the facility that the agreement
would be terminated and not renewed.  By letter of June 24, 1982, the
facility requested informal reconsideration.

On October 22, 1982, still before the provider agreement had expired and
before the State had terminated the provider agreement or resolved the
appeal, HCFA issued a notice of a(16) decision to terminate SNF provider
status as of January 1, 1983 based on a federal survey conducted August
18-20, 1982.  HCFA was under the mistaken impression that the provider
agreement actually expired on November 1, 1982.  See Agency brief at 26.
HCFA was exercising its independent "look behind" regulatory authority
over skilled nursing facilities, pursuant to section 1910(c) of the
Social Security Act.  On January 18, 1983, HCFA informed the facility
that, based on a survey conducted by HCFA on December 15-16, 1982, the
facility was certified as within all conditions of participation in the
Medicaid program.  HCFA's letter stated that, because the survey had
been conducted prior to the expiration of the provider agreement, "there
will be no break in Medicaid certification." HCFA's letter did not limit
itself to SNF certification.  Ex. 8.

On February 22, 1984, the State issued a provider agreement which was
backdated to cover the period from November 1, 1982 until July 22, 1983.
The C&T form stated that the provider agreement was issued based upon
HCFA's January 18, 1983 letter, and noted that the facility was not
currently certified.  Ex. 9;  See, also, Ex. 10 dated July 28, 1983.

We find that the appeal process under PRG-11 was commenced by the
facility's request for reconsideration of the State's June 9, 1982
letter of intent to terminate.  This appeal process was not ended by
HCFA's separate termination proceedings and extended at least through
December 15, 1982.  Although HCFA alleged insufficient diligence on the
part of the State in processing the appeal, we find the appeal was
pending under PRG-11 and accept the validity of the handling of this
appeal up to a duration of 12 months.

The issuance of a new provider agreement by the State was proper based
on HCFA's finding that certification requirements had been met at the
time of its December 15-16, 1982 survey.  The State is entitled to rely
on HCFA's determination of certification for an SNF when HCFA has
independently surveyed a facility as part of HCFA's "look behind"
authority.

The provider agreement could be properly backdated only to the date of
certification.  At the earliest, the agreement could date from December
15, 1982, the date of HCFA's survey finding the facility to be in
compliance with all conditions of participation.  Furthermore, although
the Board has held that a provider agreement cannot be backdated it its
term has expired, that ruling was in a case in which no certification
had been established to support the backdated agreement.  See
Pennsylvania Department of Public Welfare, Decision No. 331, June 30,
1982 at p. 5.  In this case certification was clearly granted by HCFA's
own act.(17)$% Therefore, we reverse the entire disallowance with
respect to Diplomat Health Care.

East Moline Care Center

The Agency imposed a disallowance upon the State for the periods from
January 5, 1983 until February 28, 1983 and from July 11, 1983 until
September 30, 1983.  In its brief the Agency added a disallowance for
the period from March 1, 1983 until July 11, 1983.

The provider agreement expired on January 4, 1983.  A letter of March 8,
1983 from the facility states that it was appealing a finding of
deficiencies involving life safety code requirements.  Ex. II.  No
notice of intent to terminate was produced by the State, although the
March 8, 1983 letter references a notice of deficiencies issued on March
1, 1983.  A hearing was scheduled for April 8, 1983, but was continued
by mutual agreement on April 19, 1983.  On November 10, 1983, the State
granted certification, based upon a waiver of life safety code
requirements and an acceptable plan of correction, retroactive to
January 5, 1983.  Ex. 13.

The Agency asserted that the provider agreement was improperly
backdated.  HCFA pointed to a July 11, 1983 letter from an attorney in
the State Office of Health Regulation as evidence that no valid appeal
had been filed.  (Ex. JJ) The letter states that, since the life safety
code deficiencies were "non-waiverable", the facility had not properly
addressed its deficiencies in an appeal.  The letter also states that
the deficiencies may not be addressed in a hearing under the Nursing
Home Care Reform Act.

The State has not produced any notice of intent to terminate Medicaid
provider status, and we therefore find that FFP is not available under
PRG-11.  Although it is clear that the State initiated some proceedings
against the facility, the July 11, 1983 letter indicates that these
proceedings were state licensure proceedings.  Ex. JJ.

Furthermore, we find that the certification was improperly backdated by
the State. Certification with a waiver may be properly backdated only to
the date the waiver request was submitted.  The State offered no
evidence of this date.  Contrary to the State's contention that a waiver
request must have been pending, the earliest date which can be inferred
from the record is March 1, 1983.  See Ex. II.  Thus, the provider
agreement can be properly backdated only to March 1, 1983.( 18)$% We
leave open the question of whether requirements of 42 CFR 442.105(a),
with regard to a written justification, were met for this facility.
See, infra, p. 3.

Therefore, we reverse the disallowance for the East Moline Care Center
with respect to the period between March 1, 1983 and September 30, 1983.
Because we reject the Agency's arguments with regard to this period, we
need not address the State's argument that part of the disallowance may
have been improperly initiated in the Agency's briefs.

Royal Gardens Nursing Center

The Agency imposed a disallowance upon the State for the period of April
1, 1983 until September 30, 1983 with respect to Royal Gardens Nursing
Home.

The provider agreement for the Royal Gardens facility expired on March
31, 1983.  The State issued a notice of intent to terminate and not
renew on July 14, 1983.  Although the State initially contended that a
valid appeal had been instituted, the State withdrew that contention.
State Reply Brief, p. 26.  Instead, the State argued that the facility
was recertified on September 29, 1983.  The transmittal documenting
certification backdates certification to July 28, 1983, based on a
survey of July 27, 1983.  Ex. 26.  HCFA did not contest this
certification with the exception of the issue of written justification
under 42 CFR 442.105.  We will not consider that issue in this case, as
explained above.  See, infra, p. 3.

The State contended that the surveys and plans of correction upon which
the certification was based were submitted by June 10, 1983, and that
certification should be effective on the date of that submission.  We
reject the State's argument that the facility should be considered
certified from June 10, 1983 to July 27, 1983.  Although the State
provided plans of correction submitted prior to July 27, the State did
not show any definitive indication of the acceptance of any of these
submissions.

We must therefore assume that later submissions were also necessary.
The State's contemporaneous recording of the date from which
certification may commence, on the C&T form granting certification as of
July 28, 1983, is the best indication of the date upon which all
requirements were met.

Accordingly, we reverse the disallowance with respect to Royal Gardens
Nursing Home Center for the period from July 27, 1983 through September
30, 1983.(19)

Conclusion

For the reasons stated above, we uphold the disallowance except with
respect to those facilities and time periods which are specified in the
text of this decision.  As a guide to the parties, we attach an Appendix
which summarizes the parts of the disallowance which have been reversed
and the parts which have been affirmed as final disallowance periods.
As noted, the disallowance periods for certain facilities are subject to
further revision based on the requirements of 42 CFR 442.105, an issue
which the Board has severed from this proceeding. The appendix lists
only the disallowances asserted in te initial notice, since we found
that there was no basis for the disallowances raised during the briefing
stages.  (20)$M04,20,20,20,20 Disallowance Period( s) Initially
Disallowance Period Final Disallowance Facility Imposed Reversed Period
Bartmann Nursing 6/1/82 - 9/23/83 - 6/1/82 - 9/23/83 Home Crestwood
Terrace 11/1/82 - 9/30/83 7/20/83 - 9/30/83* 11/1/82 - 7/19/83* Diplomat
Healthcare 11/1/82 - 9/30/83 11/1/82 - 9/30/83 - Center Dixon Health
Center 3/15/83 - 9/30/83 - 3/15/83 - 9/30/83 East Moline Care 1/5/83 -
2/28/83 3/1/83 - 9/30/83* 1/5/83 - 2/28/83* Center 7/11/83 - 9/30/83
Karlson Specialized 8/24/82 - 7/13/83 10/20/82 - 7/ 13/83 8/24/82 -
10/19/82 Living Center Manchester Manor 1/1/82 - 9/30/ 83 - 1/1/82 -
9/30/83 Miller Nursing Home 6/1/83 - 9/30/83 7/14/83 - 9/ 19/83 6/1/83 -
7/13/83 Parkview Nursing 6/2/83 - 9/30/83 - 6/2/83 - 9/ 30/83 Home Polo
Continental 12/6/82 - 9/30/83 - 12/6/82 - 9/30/83 Manor Rockford Manor
3/9/83 - 9/25/83 3/9/83 - 9/25/83 - Royal Gardens 4/1/83 - 9/30/83
7/27/83 - 9/30/83* 4/1/83 - 7/26/83* Nursing Center Sacred Heart Home
5/19/83 - 9/30/83 7/26/83 - 9/30/83 5/19/83 - 7/25/83 Saint Charles East
1/1/82 - 9/30/83 - 1/1/82 - 9/30/83 Medical Center (Park View East)
South Holland 6/9/82 - 10/14/82 not determined * not determined *
Nursing Home 6/9/83 - 9/30/83(21) South Shore Kosher 8/1/ 82 - 9/29/82
9/30/82 - 7/31/83 8/1/82 - 9/29/82 Rest Home 3/16/83 - 9/ 30/83 8/1/83 -
9/30/83 Starnes Nursing 8/14/82 - 10/12/82 10/13/82 - 7/ 31/83 8/14/82 -
10/12/82 Home, Inc. 12/10/82 - 9/30/83 8/1/83 - 9/30/83 Town Hall
Estates 5/12/83 - 7/13/83 - 5/12/83 - 7/13/83 Villas of Shannon 5/3/83 -
9/30/83 - 5/3/83 - 9/30/83 Nursing Home Vista Laguna 12/5/82 - 9/30/83 -
12/5/82 - 9/30/83 Terrace, Inc. Waukegan Terrace 3/ 20/83 - 9/30/83 -
3/20/83 - 9/30/83$X

        /1/ These eitht facilities are Manchester Manor, Parkview
Nursing Home, Polo Continental Manor, Saint Charles Medical Center, Town
Hall Nursing Home, Villa of Shamon Nursing Home, Vista Laguna Terrace,
and Waukegan Terrace.         /2/ We note, however, that the Board has
affirmed disallowances in other cases, based upon issues not expressly
raised in the notification of disallowance.  In these cases, the
notification gave general notice of the scope of the questioned
expenditures and the appellant had ample opportunity to develop the
issues present and counter-arguments to all issues raised by the
respondent.  See, e.g., New York Department of Social Services, Decision
No. 151, February 26, 1981.         /3/ The process is slightly
different with a skilled nursing facility (SNF) which provides services
to both Medicare and Medicaid patients. See Maryland Department of
Health and Mental Hygiene, Decision No. 113, July 31, 1980.  In this
case, neither party has alleged that the facilities are dual
Medicare-Medicaid SNFs.         /4/ This added disallowance period was
based upon the Agency's argument that payment was discretionary under
state law for the first 120 days. We reject this argument on pages 4-5
of this decision and, therefore, conclude there is no basis for the
added disallowance. * Resolution of disallowance periods for these
facilities is subject to further discussion regarding satisfaction of
the requirements of 42 CFR 442.105 for written justifications.

MARCH 28, 1987