DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: Colorado Department of Social Services
Docket No. 87-142
Decision No. 936
DATE: February 8, 1988
DECISION
The Colorado Department of Social Services (State) appealed
a
determination by the Health Care Financing Administration (HCFA
or
Agency) disallowing $835,304 in federal financial participation
(FFP)
claimed under Title XIX of the Social Security Act (Medicaid).
The
claims disallowed were for the cost of services to Medicaid
recipients
provided by Aspen Care Center West Nursing Home. The
disallowance was
imposed because HCFA concluded that the facility lacked a
valid provider
agreement for the period August 1, 1985 through July 9,
1986. The
question presented is whether the facility's provider
agreement
continued in effect for purposes of FFP during administrative and
state
court appeals of decisions not to renew the facility's Medicaid
provider
agreement, State license, and Medicaid certification. This issue
has
been previously considered for other facilities by this Board.
For the reasons explained below, we uphold the disallowance. Based on
the
Board's earlier decisions on this issue, involving Agency program
guidance
MSA-PRG-11, we agree with HCFA that the nursing home's provider
agreement did
not continue in effect for purposes of FFP beyond July 31,
1985, 12 months
after the non- renewal of the provider agreement. The
mere fact that
the State resurveyed the facility during the 12 months is
not a basis for
continued FFP, even pending appeal of the non-renewal
actions, under
circumstances where the State did not determine that the
facility was
certifiable. We also reject an argument by the State that
FFP was
available under MSA-PRG-11 on the basis that the facility was
upheld in an
administrative determination by a State hearing officer.
Factual Background
Aspen Care Center West Nursing Home, which operated as both
an
intermediate care facility (ICF) and a skilled nursing facility
(SNF),
had a valid provider agreement for purposes of the Medicaid program
for
the period August 1, 1983 through July 31, 1984. The facility was
also
certified as an SNF under Title XVIII of the Social Security
Act
(Medicare).
On May 15, 1984, based on the results of a March 1984 survey, the
Colorado
Department of Health (CDH) notified the facility that its State
license and
Medicaid certification would not be renewed. CDH further
noted that it
was recommending that the Medicare certification not be
renewed.
State's Ex. F. On June 5, 1984, the State Department of
Social Services
notified the facility that its Medicaid provider
agreement would not be
renewed after its expiration on July 31, 1984.
State's Ex. G. The facility
appealed the non-renewal of its Medicaid
provider agreement, as well as the
non-renewal of its State license and
Medicaid certification, to a State
hearing officer, as allowed by State
regulation. See State's Ex. H.
On November 8, 1984, the State hearing officer issued a written
order
reversing all the non-renewal actions (her decision had been
rendered
orally on July 31, 1984). State's Ex. I. The Department
of Social
Services appealed this decision to State court. State's Ex.
L. CDH
meanwhile appealed the hearing officer's decision to the CDH
Executive
Director, under separate procedures.
On December 13, 1985, the CDH Executive Director reversed the
hearing
officer on her decision regarding the facility's license,
reinstating
the initial CDH determination. State's Ex. O. The
Executive Director
declined to disturb the hearing officer's evidentiary
findings
concerning which deficiencies were sustained, but concluded
that:
. . . the hearing officer's conclusions
that various sustained
deficiencies were
"not serious" was unsupported by the record.
* * * Given the extent,
seriousness,
and repeated nature of
those violations sustained by the
hearing
officer, she clearly erred in
not finding the facility
non-compliance
to be willful and deliberate and in allowing
its
license to remain in effect.
State's Ex. O, pp. 9-10. In an amendment to the December 13,
1985
decision, the Executive Director also noted that, "because the
facility
must be licensed in order to hold Medicaid certification, such
Medicaid
certification is also revoked by this final decision." State's
Ex. P.
After the Executive Director denied a request by the facility to
stay
the effect of his order, State's Exhibit Q, the facility appealed
the
CDH Executive Director's determination to State court, State's
Exhibit
R.
The State court hearing the Department of Social Services'
appeal
meanwhile granted the Department's motion for summary judgment,
and
stayed that action pending the result of the court appeal by the
nursing
home of the CDH determination. State's Ex. M. In granting
summary
judgment, the court provided that the facility's provider
agreement
"shall be terminated should the final agency action of the
Colorado
Department of Health be sustained." Id.
The facility was again surveyed on March 4-7, 1985, while the appeals
were
pending. This survey disclosed 24 deficiencies and concluded that
the
facility was out of compliance with the regulatory standard at 42
C.F.R.
405.1120(c). State's Ex. N; Agency's Brief, p. 5. 1/
CDH,
however, did not request a plan of correction from the facility.
In a
cover letter transmitting the survey results to the facility, the
State
official wrote that:
The sole purpose in conducting this
survey . . . was to protect
the
continuation of Federal Financial Participation (FFP)
and
your facility's reimbursement during
the appeal process through
July, 1985 or
the final decision of the Executive Director of
the
Colorado Department of Health,
whichever comes first.
No Plan of Correction is necessary or requested at this time.
Id.
The facility was next surveyed on May 5-9, 1986. This survey
disclosed
34 deficiencies and concluded that the facility was out of
compliance
with two standards, relating to "twenty-four hour nursing service"
and
an "activities plan." State's Ex. U; Agency's Brief, p. 6. In
this
case, the State requested a plan of correction, which was accepted,
and
the facility was recertified. State's Ex. W. The State
entered into a
new provider agreement with the facility effective on July 10,
1986. Id.
This is why the Agency's disallowance before us extends only to
July 9,
1986.
Applicable law
The parties did not dispute the principle that FFP may continue for
some
time after the non-renewal of a provider agreement, if, under state
law,
the provider agreement continues in effect pending state
administrative
and court appeals by the facility of its non-renewal.
The original
basis for this rule was a 1971 policy statement by the
predecessor
agency to HCFA. In MSA-PRG- 11, the Agency provided
that:
When a facility appeals the termination
of its provider
agreement, Federal
financial participation is not available
for
payments to the facility during the
appeal, since the facility
does not have
a currently effective provider agreement. The
fact
that the facility formerly had a
provider agreement gives no
basis for
Federal financial participation in payments to
the
facility for the period while the
appeal is before the
administrative
agencies or the courts. If, however, State
law
provides for continued validity of
the provider agreement pending
appeal,
or if the facility is upheld on appeal and State
law
provides for retroactive
reinstatement of the agreement, the
agreement would not be considered terminated during the
appeal
period for purpose of Federal
financial participation for
payments to
the facility. 2/
State's Ex. Y. In this case, the Colorado Administrative Procedure
Act
was the State law which provided for the continued validity of
a
provider agreement pending appeal. See State's Ex. K.
In Ohio Dept. of Public Welfare, DGAB No. 173 (1981), the Board held
that
the effect of PRG-11 was limited by the following rule: when state
law or a
court order provides for the continued validity of a provider
agreement
pending appeal, FFP will be available for no more than 12
months following
non-renewal or termination or until the next
survey/certification cycle has
been completed, whichever comes first.
P. 8. This rule was derived from
statutory and regulatory requirements
which limit the duration of a provider
agreement with a properly
certified facility to no more than 12 months.
See 42 C.F.R. 442.15.
The Board reasoned that a facility should not be able
to avoid that
limitation merely because it was appealing adverse
determinations
concerning its certification or provider
agreement. This rule was
applied specifically to Colorado in
Colorado Dept. of Social Services,
DGAB No. 187 (1981), and Colorado Dept. of
Social Services, DGAB No. 377
(1983) (Colorado II).
Analysis
There is no dispute here that FFP is available for the 12-month
period
following the non-renewal of the facility's provider
agreement,
effective on July 31, 1984. Rather, the dispute concerns
the
availability of FFP for the succeeding period, until the facility's
new
provider agreement was effective.
A. The significance of the March 1985 survey
The State argued that the disallowance for Aspen Care Center West
should
be reversed because the survey on March 4-7, 1985 constituted
the
completion of a "survey/certification cycle" under the meaning of
Ohio
and as applied in the two Colorado decisions. The State argued
that the
March 1985 survey fulfilled the intent of PRG-11 based on the
allegation
that the outcome of the March 1985 survey in essence demonstrated
that
the facility was then certifiable and that the failure to
specifically
declare this in any documentation was a mere "technicality"
which should
not be held against the State. State's Opening Brief, pp. 11-12;
Reply
Brief, pp. 1-2. The State proposed that it should be allowed to
issue a
retroactive provider agreement to correct this technical
failure.
State's Opening Brief, pp. 10-11; Reply Brief, p. 2. The State
also
appeared to argue that, even if the March 1985 survey did not
actually
revive certification, as a matter of law, all a state needs to do
in
order to complete the survey/certification cycle is to merely survey
a
facility, and not necessarily actually make a determination to
recertify
the facility.
We agree with HCFA that the State is incorrect that the March 1985
survey
is a basis for continued FFP. Agency's Brief, pp. 8- 9.
Contrary to the
State's view, the March 1985 survey does not demonstrate
that the facility
was then certifiable. The survey report found that
the facility had 24
deficiencies and that it was out of compliance with
one standard, "Conformity
with other Federal, State, and local laws (42
C.F.R. 405.1120(c))". 3/
State's Ex. N. Ordinarily FFP is available in
payments to a facility
only where a facility has a valid provider
agreement evidencing its
certification as meeting Medicaid requirements.
42 C.F.R. 442.30; but see 42
C.F.R. 442.15 and 442.16. While federal
regulations do provide for the
certification of a facility with
deficiencies, the state survey agency here
did not satisfy the
conditions for certification with deficiencies, or even
purport to
extend certification based on the survey. See 42 C.F.R.
442.105 and
442.111; see also 42 C.F.R. 442.20(c).
As we explain below, the State's argument here that this
survey
nonetheless formed the basis for continued FFP to the facility
would
render meaningless these regulatory requirements concerning when
a
facility may be certified with deficiencies. Moreover, the cover
letter
transmitting the survey report explained that the "sole purpose" of
the
survey was to protect FFP through only July 1985. Therefore, on
its
face, this survey was not intended to affect the time period at
issue
here, which begins August 1, 1985.
The State argued that the survey found compliance with all
federal
requirements and found only "a few state licensure
deficiencies."
State's Reply Brief, p. 2. However, the State did not
explain the basis
for its conclusion that only "state licensure" deficiencies
were found.
The survey report relates the deficiencies which it found
specifically
to the standards in federal regulations. Also, the survey
found the
facility to be out of compliance with a standard which has no
obvious
connection to state licensure. 4/ Thus, the State failed to
support its
assertion that only State licensing deficiencies existed as of
the March
1985 survey. 5/ Since, as the Agency noted, "the survey
report on its
face shows that the facility was not in compliance with all
applicable
requirements," certification would require the acceptance of a
written
plan of correction. Agency's Brief, p. 8. 6/
We reject the State's argument that it could now somehow correct
the
allegedly "technical" failure to formally certify the facility
by
retroactively issuing a provider agreement. Such an agreement
would
necessarily be invalid, since it would be premised on survey
results
which by their terms did not provide a legal basis for certifying
the
facility. Furthermore, the retroactive acceptance of a plan
of
correction would be meaningless, since the obvious purpose of a plan
of
correction is to ensure that the facility correct the cited
deficiencies
by a date certain in order to protect the residents of the
facility. See
42 C.F.R. 442.111. We are now at this writing almost
three years past
the date of the survey that is under dispute and the
opportunity to
protect the facility's residents after that point in time has
come and
gone.
The report on the March 1985 survey and the State's brief also appeared
to
imply that, even if the State did not find the facility to be
certifiable,
the mere conducting of a survey would satisfy the intent of
PRG-11 and the
Board decisions interpreting it when they spoke of the
completion of the
"survey/certification cycle." As support for this
argument, the State
relied on the statement that the "sole purpose" in
conducting the survey was
to "protect the continuation" of FFP. State's
Ex. N.
We find the State's position here to be unreasonable. The purpose
of
limiting the continuation of FFP under PRG-11 for 12 months or
until
completion of the survey/certification cycle, was, as the Board
stated
in Ohio, not to give life to a "perennial record-keeping
requirement,"
but to reinforce the practice of surveying facilities at least
once a
year. Ohio, supra, p. 8. The requirement for such annual
surveys is,
of course, to assure that the facility is actually certifiable or
that
it can be certified through acceptance of a plan of
correction.
Conducting a survey would be a futile act if the State survey
agency
made no real effort to determine whether the facility was
indeed
certifiable. 7/ Thus, merely conducting a survey provides no
basis for
FFP.
B. The effect of administrative and court decisions
The State also argued that the provider agreement should have
continued
for purposes of FFP since the facility was upheld on appeal before
the
State hearing officer. State's Opening Brief, pp. 8-9. The
State thus
maintained that the State should receive FFP for the facility on
the
second of the grounds mentioned by PRG-11, that "the facility is
upheld
on appeal and State law provides for retroactive reinstatement of
the
agreement. . . ." State's Ex. Y; see State's Opening Brief, p. 8.
In
Colorado II, the Board declined to apply the second part of PRG-11
where
a facility's termination was found to be procedurally improper.
The
Board stated that:
The exception applies only when the
alleged deficiencies which
were the
basis for the provider's decertification are found,
on
appeal, not to have existed.
Here, . . . serious deficiencies
existed. . . . The Medicaid regulations do not provide for
FFP
for services at a facility with
deficiencies which have not been
the
subject of a waiver or a plan of correction.
Colorado II, supra, p. 4.
We find the State's argument to be clearly unavailing. First, we do
not
find there to have been any final disposition upholding the appeal.
The
State hearing officer's determination that the facility met the
federal
conditions of participation so that its provider agreement should
be
renewed was clearly not the final determination on this issue since
the
Department of Social Services itself appealed that decision to
State
court. Moreover, the lack of finality of the hearing
officer's
determination is further confirmed by the conclusion of the
CDH
Executive Director that the hearing officer erred in her
overall
conclusion as to the seriousness of the facility's deficiencies and
the
effect of those deficiencies on the facility's ability to
provide
adequate care, citing 42 C.F.R. 405.1905. State's Ex. O.
The
Department of Health is the Colorado agency which surveys facilities
for
compliance with both licensing standards and federal
certification
standards and the CDH Executive Director here clearly found the
facility
to have serious deficiencies which caused him to reverse the
hearing
officer's decision.
Moreover, even should the facility ultimately prevail in its court
appeal
of the CDH Executive Director's decision, that determination
would have no
bearing on the period of the disallowance here: August 1,
1985 through
July 9, 1986. The issue under appeal in court is the
facility's status
upon the expiration of its provider agreement on July
31, 1984. Since,
as we found above, the State did not recertify the
facility for the period
August 1, 1985 through July 9, 1986, there would
be no basis for FFP for this
period even if a court found the facility
certifiable as of July 31,
1984. The Board's holding in Ohio, supra,
that a provider agreement may
continue for purposes of receiving FFP
pending appeal for up to 12 months or
until the next
survey/certification cycle is completed, whichever comes
first, applies
with equal force in the context here. If a facility is
upheld on appeal
and its provider agreement is reinstated retroactively for
an earlier
period, that provider agreement would not continue automatically
for an
indefinite time. FFP is normally available only where a facility
has a
valid provider agreement. The State must fulfill the
general
requirements for periodically resurveying and recertifying the
facility
as a basis for continued receipt of FFP..Conclusion
For the reasons stated above, we uphold the disallowance.
________________________________ Judith
A.
Ballard
________________________________
Alexander
G. Teitz
________________________________
Cecilia
Sparks Ford Presiding Board Member
1. State's Exhibit N, which the State identified as
the March 1985
survey report, was submitted in an incomplete form; it
included the
cover letter from CDH to the facility and only the first two out
of 12
pages of the actual survey report (omitting the listing and
description
of most of the deficiencies). Also included as part of the
exhibit was
some unspecified part of the May 1986 survey (which was also
submitted
and labelled as Exhibit U). The State, however, did not
dispute the
Agency's description of the number of deficiencies found in the
March
1985 and May 1986 surveys (and both survey reports fully described
the
standards for which the facility was found to be out of
compliance).
Although the portion of the survey report in the record refers
only to
the certification requirements for SNFs, the State did not argue
that
the deficiencies found there and in the rest of the report did
not
relate equally to the facility's status as both an SNF and an ICF.
See
42 C.F.R. 442.252 and 442.300 et seq.
2. MSA-PRG-11 was revoked by the Agency, effective
September 28,
1987. The regulations now provide that FFP is available
during an
administrative appeal process for up to 120 days following the
effective
date of the termination or non- renewal of a facility's
provider
agreement. The regulations also provide for FFP where a
facility's
provider agreement is retroactively reinstated in accordance with
42
C.F.R. 442.13 and 442.30. 42 C.F.R. 442.40 and 442.42. 52 Fed.
Reg.
32544 (August 28, 1987) (State's Ex. X).
3. This standard provides:
The facility is in conformity with all Federal,
State, and local
laws relating to fire and safety,
sanitation, communicable and
reportable diseases,
post mortem procedures, and other relevant
health
and safety requirements.
Section 405.1120(a) of 42 C.F.R. is the standard that requires
state
licensure. See 42 C.F.R. 442.315, 442.321, 442.322 and
442.323.
4. The state licensure standard is at 42 C.F.R.
405.1120(a). Even
though the March 1985 survey found the facility out of
compliance with
the standard at 42 C.F.R. 405.1120(c) (see note 3), the State
maintained
here that the facility was certifiable in accordance with 42
C.F.R.
442.201(a). That regulation provides for continued payments to
an SNF
during a period when it does not meet state licensing standards so
long
as the facility "takes the steps needed to again meet the
standards."
(See 42 C.F.R. 442.251(b) for a parallel provision for
ICFs.) Sections
442.201(a) and 251(b) of 42 C.F.R. do not appear to
apply here since the
standard cited in the survey report did not pertain to
State licensure.
In any event, since there were deficiencies related to
federal
requirements, the facility could not be certified unless the
conditions
for certification with deficiencies were also met.
Furthermore, while
the facility was not found out of compliance with the
standard at 42
C.F.R. 405.1120(c) in the May 1986 survey, deficiencies were
found
related to that standard. Thus, the State's assertion that the
facility
had corrected the deficiencies related to this standard found in
March
1985 is not substantiated on this record.
5. As we explained above in note 1, the State
submitted an
incomplete version of the March 1985 survey report, State's
Exhibit N.
While the exhibit as presented was complete enough to allow us to
assess
the parties' arguments about the significance of the survey, we
note
that the State as appellant had the clear burden to document
its
position that the survey demonstrated that the facility was
certifiable
and in compliance with federal standards. We therefore
construe any
inadequacy in the record before us against the State.
6. Section 442.20 of 42 C.F.R. establishes additional
requirements
for SNFs also participating in Medicare. Section 442.20(c)
requires a
finding that the conditions causing termination have been removed
and
reasonable assurance that the condition will not recur before
a
terminated Medicare SNF can be recertified as a Medicaid provider.
The
parties did not address the applicability of this regulation.
(See
Illinois Dept. of Public Aid, DGAB No. 876 (1987), for a discussion
of
this regulation where a terminated Medicare/Medicaid SNF withdrew
from
Medicare but sought to participate in Medicaid, circumstances
apparently
analogous to this case.) We note the possible relevance of
this
regulation. However, since the survey agency clearly took no
action to
determine whether the facility was certifiable based on the March
1985
survey, we do not need to determine whether a proper certification
would
have to meet the requirements of 442.20(c).
7. We find that this conclusion is consistent with
the advice given
by a federal official in a December 27, 1984 letter to the
State. See
State's Opening Brief, p. 10. The official wrote that:
If the Health Facility Regulation Division surveys
Aspen Care
Center West prior to March 1, 1985,
continued FFP beyond that date
will be based upon
the results of that action.
State's Ex. AA. The State explained in its brief that it performed
the
March 1985 survey in reliance on this advice. Assuming that
this
reliance should have some legal significance to our conclusions here,
we
must reject the State's apparent implication that the official's
advice
could be construed to mean that continued FFP would be
guaranteed
regardless of the results of such a survey. The official's
explanation
that continued FFP would be "based upon the results" of the
survey
clearly meant that the availability of FFP would be contingent
on
whether following the next survey the facility was recertified and a
new
provider agreement