SUBJECT:

Americare Certified Special Services, Inc.,

Petitioner,

Health Care Financing Administration

I decide that the Health Care Financing Administration (HCFA) correctly determined to certify Petitioner, Americare Certified Special Services, Inc., to participate in the Medicare program, effective April 24, 1998. On that date, Petitioner met all the federal requirements for participation, including those imposed following the President's Moratorium, which was effective September 15, 1997.

I. Background

By letter dated September 14, 1998, HCFA informed Petitioner that its effective date for participation in the Medicare program was April 24, 1998.⁽¹⁾ Petitioner disagreed with HCFA's determination and requested a hearing. The case was assigned to Administrative Law Judge Mimi Hwang Leahy for a hearing and decision. The parties agreed that the case could be heard and decided without an in-person hearing. The parties each submitted exhibits and written arguments.⁽²⁾ Subsequently, the case was reassigned, first to Administrative Law Judge Marc Hillson, and then to me. I admit into evidence HCFA Exhibits (HCFA Exs.) 1 - 15 and Petitioner Exhibits (P. Exs.) 1 - 9. I base my decision in this case on the law and on the parties' submissions.

II. Issue, Findings of Fact, and Conclusions of Law

A. Issue

The issue in this case is whether HCFA correctly determined to certify Petitioner to participate in Medicare, effective April 24, 1998.

B. Findings of Fact and Conclusions of Law

I make the following findings of fact and conclusions of law (Findings) to support my decision that HCFA correctly determined to certify Petitioner to participate in Medicare, effective April 24, 1998. I discuss each of these Findings in detail, below.

1. A home health agency that applies for participation in the Medicare program may not participate until HCFA determines that the home health agency meets federal requirements.

2. A home health agency that applies for participation in the Medicare program will be surveyed on behalf of HCFA by a State survey agency to determine whether the home health agency meets federal requirements. The home health agency will be certified to participate in Medicare, effective the date that the survey is completed, if the home health agency meets all conditions of participation in Medicare, and any other federal requirements.

3. If a home health agency complies with all conditions of participation in Medicare on the date that the survey is completed, but fails to comply with any other federal requirement, HCFA will certify the home health agency to participate in Medicare on the earlier of the following dates: the date on which the home health agency complies with all federal requirements; or, the date on which the home health agency submits to HCFA a plan of correction which HCFA accepts.

4. A pre-certification survey of a subunit of Petitioner was completed on August 27, 1997. On that date, Petitioner was found to have two standard-level deficiencies and was given the opportunity to submit a plan of correction. On September 12, 1997, the State survey agency accepted Petitioner's plan of correction. On October 7, 1997, the State survey agency recommended that HCFA certify Petitioner. HCFA did not accept this recommendation, as it determined that Petitioner had not provided necessary documentation regarding its organizational structure.

5. Effective September 15, 1997, the President issued a Moratorium on new home health agencies, which was lifted effective January 13, 1998. Petitioner did not prove that it complied with all federal requirements before the imposition of the Moratorium.

6. Petitioner did not prove that it complied with all federal requirements, including the additional requirements imposed after the Moratorium was lifted, before April 24, 1998, the date on which HCFA determined that it met all the federal requirements.

7. HCFA properly determined to certify Petitioner's participation in Medicare as a home health agency, effective April 24, 1998.

III. Discussion

A. Governing Law (Findings 1 - 3)

The regulations require that an entity, such as a home health agency, must apply to HCFA to be certified to participate in Medicare. 42 C.F.R. � 489.10(a). In order to be certified, an applicant must first be surveyed to ascertain whether the applicant meets all of the federal requirements, which, for a home health agency, means meeting all conditions of participation. 42 C.F.R. �� 488.10; 489.10(d); Part 484. HCFA has delegated to the individual State survey agencies the authority to conduct surveys on HCFA's behalf. After the requisite surveys have been completed, the State survey agency forwards a recommendation to HCFA concerning the applicant's compliance with the federal requirements. 42 C.F.R. � 488.11. HCFA will accept an applicant's participation agreement on the date that a survey of that applicant is completed, provided that the applicant meets all of the pertinent federal requirements on that date. 42 C.F.R. � 489.13.⁽³⁾

If an applicant for participation fails to satisfy all federal requirements as of the date of completion of the survey, then HCFA will not certify that applicant to participate in Medicare until HCFA is satisfied that the applicant meets the federal requirements. Id. If HCFA finds, on the basis of a survey, that an applicant (other than a skilled nursing facility) complies with all conditions of participation, but fails to comply with a lesser requirement or requirements, then HCFA will certify the applicant to participate on the earlier of the following dates: the date that the applicant actually complies with all federal requirements; or, the date on which HCFA or the State survey agency receives from the applicant a plan of correction which addresses the outstanding deficiencies and which HCFA accepts. Id.

The conditions of participation which must be met by a home health agency are set forth in the statute at sections 1861(o) and 1891(a) of the Social Security Act (Act) and implemented in the HCFA regulations at 42 C.F.R. Part 484. Of particular relevance in this matter, 42 C.F.R. � 484.1 provides that home health agencies must assure that they meet certain additional requirements set forth in that Part which are considered necessary to ensure the health and safety of patients. One such requirement for agencies applying on behalf of a subunit is that the subunit must independently meet the conditions of participation. In contrast, a branch office need not be independently surveyed; it need only be located sufficiently close to a parent or subunit to share administration, supervision, and services in a manner that renders it unnecessary for the branch independently to meet the conditions of participation. 42 C.F.R. � 484.2. Before it can be determined that a home health agency has met the conditions of participation, it must first be ascertained whether an applicant is seeking certification of a parent, a subunit, or a branch. If HCFA cannot make this determination based on the information provided by a home health agency or a State survey agency, then HCFA cannot determine whether an applicant has met the conditions of participation.

Also relevant is a Moratorium on the approval of new Medicare home health agency providers which was effective September 15, 1997.⁽⁴⁾ The Moratorium was lifted on January 13, 1998, at which time new surety bond and capitalization requirements for home health agencies were imposed. HCFA Ex. 6; see 63 Fed. Reg. 292, et. seq. (1998); 42 C.F.R. �� 489.28, 489.61. An exception to the Moratorium was made for home health agencies which had been determined by HCFA (not by a State survey agency) to have successfully completed an initial survey. HCFA Exs. 5, 6. Successful completion meant that the facility was in compliance with federal participation requirements at the condition-level and had satisfied all of the provider agreement requirements. If deficiencies existed which did not constitute a condition-level deficiency, a fully acceptable plan of correction needed to have been received before September 15, 1997. HCFA Ex. 5, at 2 - 3.

B. Facts of This Case and the Application of the Law to the Facts (Findings 4 - 7)

It is evident from application of the law to the facts of this case that the earliest date that Petitioner established that it met all of the requisite federal participation requirements is April 24, 1998. Thus, that date, April 24, 1998, is the date on which HCFA correctly certified Petitioner for participation.

1. Facts

Petitioner is a home health agency. Petitioner's Statement of Material Facts (PMF), at 1; HCFA Brief (Br.), at 9. Petitioner's main office is located in Brooklyn, New York. HCFA Br., at 9. Prior to 1996, Petitioner was only licensed to operate in the five boroughs of New York City. PMF, at 1. In 1996, Petitioner submitted an application to the New York State Department of Health (NYSDH) to establish a subunit to service the suburban areas of Nassau, Suffolk, Sullivan, Ulster, Orange, Rockland, Dutchess, Putnam, and Westchester Counties. Id. Under Petitioner's plan, a subunit would be established in Westbury, New York, with branches in Orange, Westchester, and Putnam Counties. Id.

On August 28, 1997, NYSDH completed a survey of the subunit and found standard-level deficiencies. HCFA Ex. 7.⁽⁵⁾ On September 10, 1997, Petitioner submitted a plan of correction. P. Ex. 2. On September 12, 1997, NYSDH informed Petitioner that its plan of correction was acceptable. HCFA Ex. 8. On October 7, 1997, NYSDH recommended certification of Petitioner's subunit and two branches, which appear to have been changed from Petitioner's initial request for branches in three counties, to branches in only White Plains and Suffern, New York. HCFA Ex. 9. As noted above, however, on September 15, 1997, the President had announced the Moratorium on the admission of new home health agencies to the Medicare program. HCFA Ex. 3.

From the exhibits in evidence (HCFA Exs. 10 and 15) and HCFA's argument (HCFA Br., at 10) it appears that while reviewing the material forwarded by NYSDH, HCFA determined that Petitioner had not provided documentation concerning the organizational structure between its parent, subunit, and branches, such that HCFA was unable to determine whether Petitioner's components met the regulatory definition of subunit or branch. From this evidence, it appears also that HCFA directed NYSDH to request such information from Petitioner. On November 5, 1997, NYSDH requested that Petitioner provide it with the information HCFA had requested regarding Petitioner's organizational structure. P. Ex. 10. On December 24, 1997, Petitioner provided this information to NYSDH. HCFA Ex. 11, at 2 - 21. NYSDH forwarded the information to HCFA on January 14, 1998. Id., at 1.

On January 13, 1998, the Moratorium was lifted. HCFA Ex. 6. In the aftermath of the Moratorium, several new requirements for certification of home health agencies were imposed. Accordingly, in a letter dated January 29, 1998, NYSDH informed Petitioner of the new requirements, which included new application forms and a capitalization and surety bond requirement. HCFA Ex. 12. Upon receipt of the new forms, as well as other necessary information, HCFA determined that the subunit's effective date of participation was April 24, 1998. HCFA Ex. 14.

2. Application of the Law to the Facts

It is HCFA's responsibility to determine whether an applicant for participation in the Medicare program as a home health agency meets the applicable conditions of participation for certification as a provider. 42 C.F.R. � 488.12; Arbor Hospital of Greater Indianapolis, DAB No. 1591, at 7 - 8, n.6 (1996); see, e.g., Central Suffolk Hospital v. Shalala, 841 F. Supp. 492, 495 (E.D. N.Y. 1994). Until there is a finding of full compliance made by HCFA, HCFA is not authorized to certify the applicant. A prerequisite to determining whether a home health agency is in compliance with participation requirements is that HCFA must be able to ascertain whether a component of the home health agency is a parent, a subunit, or a branch. Where HCFA cannot ascertain whether a home health agency component is a subunit or branch, it cannot ascertain whether or not the conditions of participation have been met.

Here the evidence shows (HCFA Exs. 10, 11, and 15) that HCFA was unable to make this determination because, initially, Petitioner had not put in sufficient evidence regarding its organizational structure. HCFA requested this information from Petitioner via the NYSDH, which informed Petitioner that it could not continue processing Petitioner's application without it. HCFA Ex. 10. This information was not provided to either NYSDH or HCFA until after the Moratorium was in place. Thus, Petitioner was not covered by the exception to the Moratorium for applicants who had successfully completed an initial survey, since successful completion of the survey must be determined by HCFA, not by a State survey agency such as NYSDH. Moreover, HCFA defined successful completion of a survey in the context of the Moratorium as ". . . a determination by HCFA (emphasis added) that the facility is in compliance with Medicare requirements at the condition-level, and satisfaction of all provider agreement requirements." HCFA Ex. 5, at 3. HCFA never made such a determination.

Petitioner asserts that neither it nor NYSDH had any doubt as to whether Petitioner's subunit met the conditions of participation (and, by inference, that its asserted branches were indeed branches and did not need to be separately surveyed). Petitioner asserts further that HCFA is attempting to incorporate a program memorandum, HCFA 97-1 (HCFA Ex. 2) into the regulation in an improper attempt at substantive rulemaking by using the section of the regulation containing definitions at 42 C.F.R. � 484.2 to impose an obligation independent of other conditions and obligations. Petitioner argues alternatively that, even if the definition section at 42 C.F.R. � 484.2 is a substantive pre-requisite for home health agency certification, Petitioner fulfilled that requirement by September 10, 1997. Thus, there was no need for HCFA to "delve into the minutiae of Americare's organization to distinguish subunits from branches." P. Reply Br., at 14.

It is, however, just this "minutiae" of an organization that HCFA must delve into to determine the status of a home health agency's components, particularly where HCFA needs to determine whether a component is a subunit or a branch. It is necessary to distinguish between a branch and subunit of a home health agency to ensure the health and safety of patients served by such entities. See Homelife Nursing, Inc., DAB CR417, at 5 - 6 (1996). If a branch is not "sufficiently close" to share administration, supervision, and services with a parent or subunit, it must meet the conditions of participation on its own, which means that it must separately undergo an onsite survey to protect the health and safety of its patients. 42 C.F.R. � 484.2. Thus, the demonstration of a corporate relationship and the organizational structure of an applicant is the necessary prerequisite to the entire certification process. Program Memorandum 97-1 merely serves to give guidance as to how to go about making the determination. The memorandum does not impose on HCFA the duty to make such a determination. That duty is inherent in the regulation itself. 42 C.F.R. �� 484.1, 484.2.

Petitioner has argued also (P. Br., at 8 - 10) that the imposition of the new certification requirements imposed once the Moratorium was lifted was an improper retroactive application of the requirements to Petitioner. However, once the Moratorium was lifted, Petitioner, along with all other providers with pending Medicare applications who had not completed an initial survey, had to satisfy the new requirements before being certified. 63 Fed. Reg. 292, et seq. (1998); 42 C.F.R. �� 489.28, 489.61. I do not have the authority to hold otherwise.

III. Conclusion

HCFA correctly determined to certify Petitioner to participate in the Medicare program, effective April 24, 1998. On that date, HCFA determined that Petitioner met all the federal requirements for participation, including those imposed following the President's Moratorium.

Marion T. Silva

Chief Administrative Law Judge

1. Initially, HCFA certified Petitioner's subunit as of July 27, 1998. Petitioner protested this date to HCFA, and HCFA retracted the date of July 27, 1998, and certified Petitioner as of April 24, 1998. HCFA Ex. 14; P. Ex. 7.

2. By motion dated December 14, 1999, HCFA requested permission to file a sur-reply brief. HCFA appended the brief to its motion. In its response dated December 21, 1999, Petitioner objected to my consideration of this brief. I note that in Judge Leahy's order scheduling the briefing in this case, she contemplated an initial exchange of briefs and one response. However, her order did not preclude the receipt of subsequent briefing. As Petitioner had the opportunity to respond to HCFA's brief (and did so in its December 21, 1999 response) I perceive no prejudice to Petitioner in my considering HCFA's sur-reply.

3. Effective September 17, 1997, the regulation at 42 C.F.R. � 489.13 was changed. With regard to home health agencies, this change is important only insofar as it relates to the effective date being the date the State or HCFA receives a plan of correction as opposed to the date a facility submits a plan of correction. Otherwise, the effective date for a home health agency continued to be the date on which the home health agency met all condition-level requirements and had an acceptable plan of correction for standard-level deficiencies. 62 Fed. Reg. 43932 - 43933 (1997).

4. A U.S. District Court upheld the Moratorium's validity in Putnam Home Health Care, Inc., v. United States, No. 97-1274-Civ-J-20C (M.D. Fla., Dec. 9, 1997).

5. Where Petitioner and HCFA have introduced the same document into evidence as an exhibit, I cite to HCFA's exhibits.