$05:Civil Money Penalty
Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
Transitional Hospitals Corporation -- Las Vegas,
Petitioner,
- v. -
Health Care Financing Administration.
DATE: January 6, 1995
Docket No. C-94-413
Decision No. CR350
DECISION
On March 28, 1994, the Health Care Financing Administration (HCFA)
notified Petitioner that it had approved its participation in
Medicare as an acute care hospital effective February 10, 1994.
Petitioner requested that HCFA reconsider this determination.
Petitioner contended that HCFA should have approved its
participation in Medicare effective January 20, 1994. HCFA denied
Petitioner's request for reconsideration. Petitioner requested a
hearing. The case was assigned to me for a hearing and a decision.
HCFA moved for disposition of this case without an in-person
hearing, asserting that it was entitled to a decision sustaining
its determination based on the undisputed material facts and the
law. Petitioner opposed the motion. Petitioner argued that there
exist disputed material facts such that an in-person hearing is
necessary to resolve the case.
I conclude that there is no need for an in-person hearing in this
case. 1/ I find that HCFA is entitled to a
decision sustaining its determination to approve Petitioner's
participation in Medicare effective February 10, 1994.
I. Issues, findings of fact, and conclusions of law
The issue in this case is whether HCFA correctly certified
Petitioner to participate in Medicare as an acute care hospital
effective February 10, 1994. In deciding that HCFA correctly
certified Petitioner's participation effective February 10, 1994,
I make specific findings of fact and conclusions of law. After
each finding or conclusion, I cite to the page or pages of the
decision at which I discuss the finding or conclusion.
1. A provider's participation in Medicare will become
effective as of the date that an onsite survey of the provider is
completed by or on behalf of HCFA if, on that date, the provider
meets all federal health and safety requirements for participation
and any other requirements imposed by HCFA. Page 4.
2. If a provider does not meet all requirements for
participation as of the date that an onsite survey is completed,
then the provider's participation in Medicare will become effective
on the earlier of the following dates:
a. The date on which the provider meets all
requirements for participation; or
b. The date on which the provider submits a correction
plan acceptable to HCFA, or an approvable waiver request, or both.
Page 4.
3. HCFA may not certify a provider to participate in Medicare
where that provider has not met all requirements for participation,
submitted a plan of correction acceptable to HCFA, or submitted an
approvable waiver request. Pages 4, 8 - 11.
4. Petitioner did not meet all requirements for participation
in Medicare as of January 20, 1994, the date when an onsite survey
of Petitioner was completed. Pages 5 - 7.
5. The earliest date that Petitioner met all requirements for
participation in Medicare was February 10, 1994, the date that
Petitioner submitted a plan of correction acceptable to HCFA.
Pages 7, 12 - 13.
6. Petitioner is not entitled to be certified for
participation in Medicare earlier than February 10, 1994, due to
the fact that the individuals who surveyed Petitioner advised
Petitioner's representatives on January 20, 1994, that Petitioner
met all conditions for certification as a Medicare provider. Pages
5 - 6, 11 - 12.
7. Petitioner is not entitled to be certified for
participation in Medicare earlier than February 10, 1994, due to
the fact that the individuals who surveyed Petitioner did not tell
Petitioner's representatives on January 20, 1994, that Petitioner
must correct outstanding deficiencies before being certified as a
Medicare provider. Pages 6, 11 - 12.
8. Petitioner is not entitled to be certified for
participation in Medicare earlier than February 10, 1994, even if
the individuals who surveyed Petitioner failed to follow the
requirements of the operating manual governing surveys of providers
by State agency surveyors. Pages 6, 12.
II. Discussion
A. Governing law
1. Criteria for participation in Medicare
The statutory criteria for a hospital's participation in Medicare
are contained in section 1861(e) of the Social Security Act (Act).
Regulations which implement these criteria, and which set forth
additional requirements for participation by a hospital, are
contained in 42 C.F.R. Part 482.
The purpose of both the Act and the regulations is to establish
criteria for a hospital's participation in Medicare which promote
and protect the health and safety of Medicare beneficiaries. The
criteria for participation contained in the Act are, on their face,
intended to achieve this purpose. Act, section
1861(e)(1) - (9). 2/ The criteria contained in the regulations are
intended also to achieve this purpose. 42 C.F.R. 482.1 -
482.66.
Regulations governing acute care hospitals' participation in
Medicare establish the conditions under which hospitals may
participate. A condition is generally set forth at the beginning
of each regulation governing participation, in the form of a
broadly stated prerequisite to participation. The conditions of
participation established by these regulations generally express
conditions stated in the Act. For example, the regulation which
establishes medical staff requirements for participating hospitals
states, as a condition of participation, staffing requirements that
are contained in the Act (although in somewhat broader language
than the statutory language). 42 C.F.R. 482.22; see Act,
section 1861(e)(3).
These regulations establish also standards of participation, which
are criteria intended to elaborate and to flesh out the conditions
of participation. In turn, these standards contain subdivisions
(elements). For example, the medical staff condition of
participation provides as a standard under that condition that a
participating hospital must have a medical staff that is "composed
of doctors of medicine or osteopathy . . . ." 42 C.F.R.
482.22(a). One element of this standard is that the medical staff
must conduct periodic appraisals of its members. 42 C.F.R.
482.22(a)(1).
2. The circumstances under which HCFA may approve
a provider's participation in Medicare
The circumstances under which HCFA may approve a provider's
participation in Medicare are established by regulation. 42 C.F.R.
489.10. An agreement between a provider and HCFA becomes
effective on the date that HCFA completes an onsite survey of the
provider if, on that date, the provider meets all conditions of
participation and any other requirements imposed by HCFA. 42
C.F.R. 489.13(a). As of the effective date of the agreement,
the provider will be eligible to receive Medicare reimbursement for
its services.
If the provider fails to meet any of the requirements established
by HCFA for certification on the date that the survey is completed,
then the agreement becomes effective, and the provider becomes
eligible to receive Medicare reimbursement for its services, on the
earlier of two dates. These are: 1) the date on which the
provider meets all HCFA requirements; or 2) the date on which the
provider submits a plan of correction to HCFA which HCFA accepts,
or an approvable waiver request, or both. 42 C.F.R.
489.13(b)(1), (2).
B. Material facts
The following material facts are not disputed. Petitioner is an
acute care hospital in Las Vegas, Nevada, which began operating in
late December 1993. Petitioner applied to participate as a
provider in Medicare. In January 1994, Petitioner was surveyed on
behalf of HCFA by surveyors from the Bureau of Licensure and
Certification of the Health Division of the Nevada Department of
Human Resources (Nevada State agency). Two surveys were performed,
consisting of a Medicare survey and a Life Safety Code survey.
These surveys were completed, respectively, on January 19 and 20,
1994.
In both surveys, the surveyors identified deficiencies in
Petitioner's operations. The deficiencies identified by the
surveyors included failures to comply with participation standards
established by regulation, and with elements of those standards.
HCFA Ex. 1, 2. 3/ By letters of January 25 and 26, 1994, the
Nevada State agency gave Petitioner written notice of the
deficiencies. Id.; P. Ex. 4; HCFA Ex. 3. On February 10, 1994,
Petitioner submitted to the Nevada State agency its plans of
correction. HCFA Ex. 1, 2. 4/ On March 28, 1994, HCFA advised
Petitioner that it had accepted its agreement to participate in
Medicare as an acute care hospital, effective February 10, 1994.
HCFA Ex. 4.
Petitioner asserts the presence of additional facts. For purposes
of this Decision, I accept the following fact contentions made by
Petitioner. On January 20, 1994, at the completion of the two
surveys, the Nevada State agency surveyors gave Petitioner's
representatives a verbal report of their findings. The surveyors
advised Petitioner's representatives that Petitioner met all
Medicare conditions of participation. However, they told
Petitioner's representatives also that they had identified some
deficiencies in Petitioner's operations. P. Ex. 1, page 3; P. Ex.
2, page 2. The surveyors did not provide Petitioner's
representatives with a written statement of the deficiencies that
they found. P. Ex. 1, pages 2 - 3; P. Ex. 2, page 2. The
surveyors told Petitioner's representatives that they would take
their survey results back to their office, compile their findings,
and mail the written results to Petitioner. P. Ex. 1, page 3.
The surveyors did not tell Petitioner's representatives that the
date when Petitioner would be certified to participate in Medicare
would depend on Petitioner's response to the written statement of
deficiencies that the surveyors would be preparing. P. Ex. 1, page
3; P. Ex. 2, page 2. The surveyors did not tell Petitioner's
representatives when Petitioner would be certified to participate
in Medicare. P. Ex. 2, page 2.
Petitioner does not contend that the surveyors told its
representatives at the completion of the surveys that Petitioner
would be certified to participate in Medicare as of the surveys'
completion date (January 20, 1994). Nor does Petitioner contend
that the surveyors told Petitioner's representatives that
Petitioner would be excused from the obligation to submit a plan of
correction of deficiencies as a prerequisite to becoming certified
to participate in Medicare.
For purposes of this Decision, I accept also Petitioner's assertion
that the surveyors did not conduct their exit conference with
Petitioner's representatives in full compliance with the
requirements of the State Operations Manual (SOM). The SOM
consists of HCFA's instructions to State agencies which, in part,
govern the manner in which surveys of providers are to be
conducted. I accept Petitioner's representation that the SOM
required the surveyors to notify Petitioner that the effective date
of its participation in Medicare would be determined according to
the date that Petitioner submitted its plan of correction of the
deficiencies identified by the surveyors, and that the surveyors
failed to comply with this requirement. Petitioner's Brief at 14
- 15.
C. Analysis of the parties' arguments
Relying on the language of 42 C.F.R. 489.13, HCFA argues that
Petitioner could not be certified to participate in Medicare on
January 20, 1994, inasmuch as Petitioner did not meet all of HCFA's
participation requirements on that date. HCFA asserts that the
earliest date that Petitioner qualified for certification was
February 10, 1994, the date on which Petitioner submitted plans of
correction to HCFA which HCFA determined to be acceptable.
Petitioner does not deny that there were deficiencies in its
operations as of January 20, 1994. Nor does Petitioner deny that
the deficiencies constituted failures to comply with HCFA's
certification requirements. Petitioner does not assert that it
corrected any of these deficiencies prior to February 10, 1994, the
date on which it submitted its plans of correction. Thus,
Petitioner acknowledges that, under 42 C.F.R. 489.13, Petitioner
was not in compliance with all of HCFA's requirements on January
20, 1994, and that it did not come into compliance with those
requirements prior to February 10, 1994, the date on which it
submitted acceptable plans of correction. 5/
Petitioner argues that the requirements contained in 42 C.F.R.
489.13 are not applicable here. It contends that, through no fault
of its own, it was misled by Nevada State agency surveyors into
believing that it did not have to correct deficiencies as a
prerequisite to certification. Petitioner asserts that, had it
known that it had to correct deficiencies identified by the
surveyors as a prerequisite to certification, it would have
corrected them prior to February 10, 1994. Therefore, according to
Petitioner, it relied to its detriment on misleading statements
made by Nevada State agency surveyors. It argues also that the
surveyors' failure to tell it, in contravention of SOM
requirements, that it would be certified as of the date it
submitted acceptable plans of correction, should estop HCFA from
denying certification as of the date of the completion of the
surveys. According to Petitioner, the reasonable remedy would be
for me to order that it be certified as a Medicare provider,
effective January 20, 1994.
As I explain below, I do not find that Petitioner can assert
reasonably that it was misled into believing that it would be
certified before it corrected the deficiencies that the surveyors
identified. However, I would find that Petitioner is not entitled
to be certified prior to February 10, 1994, even if I were to find
that Petitioner had been misled as it contends. That is so because
I find no legal basis for Petitioner's estoppel argument.
Central to my conclusion is that Petitioner's estoppel argument
relies on a fundamental misconstruction of HCFA's obligations under
the Act and implementing regulations. The Act and regulations do
not impose on HCFA the duty to pay Medicare reimbursement to
providers who are not in compliance with participation
requirements. No such duty exists even where HCFA might arguably
mislead a provider into believing that it would be certified to
participate when, in fact, the provider had not met participation
requirements. The Act and the regulations impose on HCFA the duty
to protect the welfare of Medicare beneficiaries. Where HCFA's
agents conduct a survey of an applicant for participation in
Medicare and find deficiencies, HCFA's obligation is to refrain
from certifying the applicant until the deficiencies are corrected.
A provider's duty is to understand the implications of a finding
that deficiencies exist and to do whatever is necessary to bring
its operations into compliance with the legal requirements for
certification. A provider may not rely on errors or omissions by
HCFA's agents to obtain certification in advance of the date when
it complies fully with certification requirements.
I analyze the relevant law and facts in this case as follows.
The provider certification regulations do not permit
HCFA to certify a provider to participate in Medicare where that
provider has not complied with all certification requirements. The
equitable principle of estoppel does not supersede or supplant the
requirements of the regulations.
The regulation governing the date when a provider becomes certified
states plainly, and without exception, that a provider must meet
all federal requirements before being certified. 42 C.F.R.
489.13(a), (b). The regulation does not permit a deficient
provider to be certified prior to correcting its deficiencies.
This is true even where the provider is aware of deficiencies, but
concludes incorrectly that it need not correct those deficiencies
as a prerequisite to certification. This is true even if the
provider has been misled by State agency surveyors into believing
that it need not correct deficiencies prior to becoming certified.
Petitioner argues that, notwithstanding the plain language of the
regulations, the doctrine of estoppel may be invoked to bar HCFA
from denying certification to a provider where HCFA misleads a
provider into believing that it will be certified prior to
correcting deficiencies. Petitioner cites Livingston Care Center,
Inc., OHA Appeals Docket No. 000-51-7010 (1989), as precedent for
this argument. 6/ In Livingston, a Social Security Administration
Office of Hearings and Appeals administrative law judge held that
HCFA had not established a legitimate basis to terminate the
participation in Medicare of a skilled nursing facility. Id. at 63
- 64. The administrative law judge based his decision, in part, on
his finding that the State agency that surveyed the provider failed
to comply with the requirements contained in the SOM governing the
information which State agency surveyors were obligated to impart
to the provider as part of the inspection process. 7/
I am not persuaded by the Livingston decision that HCFA may be
estopped from denying certification to Petitioner at a date earlier
than the date when Petitioner complied with participation
requirements. First, the Livingston decision does not operate as
precedent and I am not required to accept it.
Second, the legal principle which governed the judge's decision in
Livingston does not operate here. Livingston is a decision which
upholds a provider's rights under the Act. In Livingston, the
administrative law judge found that the provider had a statutory
right to continue as a Medicare provider while it was given a
reasonable opportunity to correct deficiencies. Id. The State
agency's surveyors' failure to impart necessary information to the
provider concerning the deficiencies they found was held to deprive
the provider of the opportunity to correct its deficiencies.
Here, there are no statutory rights at issue. There is no
statutory right for a provider-applicant to be certified as a
Medicare provider while it attempts to correct deficiencies.
My interpretation of the provider certification regulations is
similar to the analysis I made of the same regulations in SRA,
Inc., D/B/A St. Mary Parish Dialysis Center, DAB CR341 at 18 - 19
(1994). In SRA, as in this case, I held that the regulations which
govern certification of a provider to participate in Medicare do
not permit a provider to be certified until it complies with all
requirements for participation. Id.
Petitioner argues that the SRA decision is not applicable here.
Although the facts of SRA are somewhat different from the facts of
this case, the law on which that decision is based is applicable
also in this case.
In SRA, State agency surveyors conducted several surveys and a
complaint investigation of the petitioner which identified
deficiencies. The State agency provided the petitioner with
notices of these deficiencies. The petitioner argued that the
State agency did not provide it with timely notice of the
deficiencies. It argued also that it had complied "substantially"
with certification requirements. It asserted that it ought to have
been certified at a date earlier than the certification date
established by HCFA, due to its "substantial" compliance with
certification requirements and the alleged failure of the State
agency and HCFA to give it timely notice of deficiencies.
I held that the petitioner in SRA did not prove its compliance with
certification requirements at any date prior to the certification
date established by HCFA. I held also that the requirement that
the petitioner comply with certification requirements was not
vitiated by alleged failures by the State agency or HCFA to provide
the petitioner with timely notice of deficiencies (although I held
also that the notices that were sent to the petitioner were not
untimely).
The regulations are consistent with congressional
intent. The purpose of both the Act and the regulations is to
protect the welfare of Medicare beneficiaries by assuring that only
providers who comply with all applicable criteria governing the
delivery of services are reimbursed for those services. SRA, at
19. It would not be consistent with the purpose of the Act or the
regulations to permit a provider to claim reimbursement for its
services where that provider is not complying with certification
requirements.
Indeed, when the competing equities of Petitioner and those
Medicare beneficiaries who are served by Petitioner are measured
against this congressional intent, it is apparent that Petitioner
cannot prevail. Congress has decided that Medicare beneficiaries
have an interest in being provided health care consistent with
appropriate health and safety requirements which is superior to
providers' interest in being reimbursed for services to Medicare
beneficiaries. Thus, Congress has decided that
providers who fail to meet certification requirements must not be
certified to provide services to beneficiaries.
Based on the facts contended by Petitioner, Petitioner
has not proved that it was misled by Nevada State agency surveyors
into believing that it need not correct deficiencies in its
operations as a prerequisite to being certified. The surveyors
made no affirmative statements which were misleading. Furthermore,
Petitioner cannot assert, reasonably, that it was misled by what
the surveyors did not say. 8/
The surveyors said nothing affirmatively misleading to Petitioner's
representatives. The surveyors did not tell Petitioner's
representatives that Petitioner would be certified at any date
earlier than the date when Petitioner corrected the deficiencies
identified by the surveyors. The record establishes only that the
surveyors told Petitioner's representatives that: 1) there were
deficiencies in Petitioner's operations; and 2) they would be
providing Petitioner with written notification of the deficiencies.
9/
Petitioner cannot assert credibly that it was misled into
believing, from statements that the surveyors did not make to
Petitioner's representatives, that it would be certified prior to
correcting the deficiencies that were identified by the surveyors.
It is within the realm of possibility that a provider who is
totally ignorant of the survey and certification process might
conclude from the surveyors' failure to state that certification
would be contingent on correction of deficiencies that it would be
certified to participate in HCFA before deficiencies were
corrected. But neither Petitioner nor other applicants to become
providers may rely on ignorance of the certification process to
assert that HCFA should be estopped by its agents' failure to
assertively link certification to correction of deficiencies.
An applicant for certification as a Medicare provider has a duty to
understand and comply with the requirements of the applicable law
and regulations. If Petitioner did not know that it had to correct
its deficiencies before being certified, it had a duty to find that
out. The prerequisite that Petitioner correct deficiencies before
becoming certified would have been apparent to Petitioner had it
simply read the relevant regulation.
The statements made to Petitioner's representatives by the Nevada
State agency surveyors would not have misled anyone familiar with
the regulations governing certification. Had Petitioner considered
these statements in the context of 42 C.F.R. 489.13, it would
have known immediately that it would not be certified until it
corrected the deficiencies identified by the surveyors.
The failure by Nevada State agency surveyors to comply
with SOM requirements does not entitle Petitioner to participate in
Medicare at a date earlier than February 10, 1994. The SOM
establishes guidelines to be followed by surveyors in the conduct
of surveys. It does not constitute a statement by the Secretary
which supersedes regulations. There is nothing to suggest that the
Secretary has directed that the SOM be distributed to providers as
an interpretation of the Act, or as a statement of their rights in
the survey and certification process. In no respect does the SOM
establish rights which inure to the benefit of providers. Thus,
the controlling law and policy here remains the requirement in the
regulations that providers not be certified until they comply with
all requirements for participation.
Moreover, Petitioner does not allege that it relied on the SOM to
its detriment. Petitioner does not contend that its
representatives assumed that Petitioner would be certified
effective January 20, 1994, based on their understanding of the
SOM.
III. Conclusion
I conclude that summary disposition is appropriate in this case and
that there is no need for an in-person hearing. Based on the
undisputed material facts (including those facts alleged by
Petitioner which I have accepted for purposes of this decision) and
the law, HCFA correctly certified Petitioner as a Medicare provider
on February 10, 1994, the date when Petitioner submitted its
plans of correction. There is no basis for me to order that
Petitioner be certified at any date prior to February 10, 1994.
Steven T. Kessel
Administrative Law Judge
1. In order to decide this case, I have accepted as true all
facts asserted by Petitioner to be material. I discuss these facts
below.
2. These criteria include the requirement that a hospital:
maintain clinical records on all patients; have bylaws to govern
its physician staff; require that all of its patients be under the
care of a physician; provide 24-hour nursing services rendered or
supervised by a registered professional nurse; have in effect a
hospital utilization review plan; and meet applicable State or
local licensing standards. Act, section 1861(e)(2) - (7).
3. HCFA submitted six exhibits (HCFA Ex. 1 - 6). Petitioner
submitted four exhibits (P. Ex. 1 - 4). Neither party has objected
to the admission into evidence of the other's exhibits. I admit
all of the exhibits into evidence, although, strictly speaking, it
is not necessary for me to do so, inasmuch as many of them are
evidence of facts which are not in dispute.
4. The documents in which the deficiencies are identified are
each captioned "Statement of Deficiencies and Plan of Correction."
HCFA Ex. 1, 2. Petitioner was instructed to prepare written plans
of correction to resolve the deficiencies and to describe the
proposed corrections in the right-hand columns of the statements of
deficiencies. HCFA Ex. 3; P. Ex. 4. The statements of
deficiencies which are in evidence as HCFA Ex. 1 and 2 contain also
Petitioner's plans of correction.
5. Petitioner did not request a waiver from participation
requirements.
6. The Livingston decision is included in the record of this
case as Attachment A to Petitioner's November 21, 1994 Brief.
7. Below, I explain why the failure of Nevada State agency
surveyors in this case to comply with the requirements of an SOM
does not entitle Petitioner to be certified at a date earlier than
the date it complied with Medicare participation requirements.
8. Nor is there any evidence to show that the Nevada State
agency was dilatory in notifying Petitioner in writing about the
deficiencies which were identified at the January 19 and 20, 1994
surveys. The Nevada State agency sent written notification and a
request for plans of correction to Petitioner on January 25 and 26,
1994, three and four working days from January 20, 1994.
9. For the reasons which I discuss above, I would not find in
favor of Petitioner even if Petitioner were able to prove that the
Nevada State agency surveyors had told its representatives that it
need not correct deficiencies as a prerequisite to becoming
certified.