DEPARTMENTAL APPEALS BOARD
Department of Health and Human Services
SUBJECT: Kansas Department of
DATE: December 5, 1989
Rehabilitation Services Docket Nos. 88-147 89-40
Decision No. 1118
DECISION
The Kansas Department of Social and Rehabilitation Services (State)
appealed determinations by the Health Care Financing Administration
(Agency) disallowing federal financial participation (FFP) claimed under
Title XIX of the Social Security Act (Medicaid). The Agency disallowed
a total of $15,765,066 for payments for services at Winfield State
School and Training Center (Winfield), a state-operated intermediate
care facility for the mentally retarded (ICF/MR) for the period February
18, 1987 through August 18, 1988. 1/ The Agency's disallowance was
based on its determination that Winfield did not have an effective
provider agreement with the State during that period.
February 18, 1987 was the effective date of an Agency determination
cancelling approval of Medicaid participation for Winfield based on the
Agency's finding that conditions at that facility constituted a serious
and immediate threat to its patients' health and safety. The termination
letter provided for FFP to continue for 30 days following termination
(until March 20, 1987) for patients already in the facility. On March
25, 1987, the Agency determined that the facility had improved enough to
inform the State: "Because of the actions taken and planned, your
Department may issue a new provider agreement to the Winfield State
Hospital and Training Center for the period March 21, 1987 through June
30, 1987." State Ex. 31. The State, however, did not enter into a new
provider agreement with Winfield until August 19, 1988.
Summary of Analysis
The Agency's disallowance hinged entirely on the absence of a provider
agreement as such during the period February 18, 1987 through August 18,
1988. On August 31, 1989, the Board issued a preliminary analysis
tentatively concluding that the disallowance should be overturned. The
parties submitted comments and participated in a telephone conference
call concerning the preliminary analysis. Based on the entire record
developed in this case, the Board has concluded that the preliminary
analysis was correct and that the disallowance should be overturned.
Below we summarize the analytical points set forth in the preliminary
determination, indicate the parties' reactions to them, and briefly
state the final ruling on them. Then, after restating the regulatory
and factual background for this case, we explain our final ruling.
o Contrary to the State's initial assertions, the plain language of
section 1910(c) of the Social Security Act (Act), as well as the
legislative history and implementing regulations, indicates that the
Agency had the authority to terminate Winfield's provider agreement as
of February 18, 1987. 2/ We therefore concluded in the preliminary
analysis that the effect of such a determination is the immediate
cut-off of FFP for services to patients in that facility. The State
conceded in its comments on that analysis that the effect of the
Agency's order was to cut off FFP immediately. (It argued, however, that
the preliminary analysis erroneously held that the Winfield provider
agreement was terminated for all purposes; as we discuss below, this was
not the conclusion we preliminarily reached below.) We therefore affirm
that Winfield's provider agreement was terminated for federal purposes
as of February 18, 1987. o Given that Winfield's provider agreement was
effectively terminated on February 18, 1987, the next issue is whether
FFP was authorized during the period February 18, 1987 through March 20,
1987, as provided in the termination letter. In its briefs filed prior
to the preliminary analysis, the Agency claimed that the Regional
Administrator was without authority to provide that FFP could continue
during that period. We found that the record demonstrated that the
Regional Administrator's apparent interpretation of 42 C.F.R. 441.11,
an exception to the prohibition against FFP for patients at facilities
without a provider agreement, reflected what was evidently a standard
Agency practice to authorize FFP for a 30-day period to allow patient
transfers. This interpretation was sanctioned in writing by the
Agency's central office. Preliminary analysis at 13-16. The Agency did
not, in its comments on the preliminary analysis, offer any argument or
evidence opposing the Board's proposal to adopt the Regional
Administrator's interpretation. Therefore, we adopt the preliminary
analysis on this point and overturn the disallowance of FFP for the
period February 18 through March 20, 1987.
o FFP for the period beginning March 21, 1987 depends on what
interpretation is given the Agency's March 25, 1987 letter giving the
State permission to issue a new provider agreement with a beginning date
(March 21, 1987) that corresponded to the latest Agency survey of
Winfield and an ending date one month shorter than the cancelled
provider agreement. A provider agreement function is to provide
evidence of certification, 42 C.F.R. 442.30, so a provider agreement may
be backdated to the date of certification, 42 C.F.R. 442.13. In the
preliminary analysis, we found that the March 25 letter, taken in the
context of the dealings of the parties as shown in the record, was
intended as notice to the State that FFP could lawfully be resumed
because Agency surveyors had found the facility to be certifiable for
the period March 21 through June 30, 1987. We therefore tentatively
concluded that the State could have -- and still may -- issue a new
provider agreement backdated to March 21. The Agency disputed this point
but, as we discuss below, never satisfactorily explained how it was that
the Regional Administrator lacked authority to modify his view of
circumstances at Winfield and permit resumption of FFP without further
State action. Thus, based on our discussion below, we conclude that the
State could backdate a provider agreement to March 21, 1987, the date
approved by the Regional Administrator. We note that as of January
1988, the Agency established the interpretation it presses here as
national policy; this decision does not disturb that policy.
o Both parties evidently agreed -- and still do -- that if there was a
provider agreement for Winfield with an effective date of March 21,
1987, then that provider agreement remained effective through August 18,
1988 by operation of law (under section 1910(c)(2) of the Act) because
the State's timely appeal of a June 8, 1987 Agency determination
cancelling approval of Winfield's Medicaid participation was pending
during that period. (This termination was not based on a finding of
immediate and serious threat to patient health and safety.) Thus,
having determined that the provider agreement was reinstated or
backdated to March 21, 1987, the disallowance for the period March 21,
1987 through August 18, 1988 must be overturned.
o Finally, we noted in the preliminary analysis that, "although we may
overturn the blanket disallowance of all claims for the period during
which the State failed to issue a provider agreement to Winfield, the
Agency is not precluded from taking a disallowance based upon more
specific findings, e.g., that Winfield during this period failed to
provide active treatment to individual residents." Preliminary Analysis
at 4. The State objected to this statement, but it did not provide any
persuasive basis precluding such a disallowance. Thus, the Board's
statement, which was in the nature of an observation, stands.
Regulatory 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. Under this program, a state conducts
an on-site survey of a facility seeking approval for participation in
Medicaid in order to determine whether that facility is in compliance
with all federal and state standards and must "certify" that compliance.
If no deficiencies are found during the survey, the state may enter into
a provider agreement with the facility as of the date of the completion
of the survey, or, if there are deficiencies, as of the date the
facility corrects the deficiencies or submits an acceptable plan of
correction or waiver request. In other words, since certification must
precede the provider agreement, a provider agreement may be made
effective no earlier than the certification date. 42 C.F.R. 442.13. If
a facility is certified with deficiencies, the state must either set a
shortened certification period or set an automatic cancellation date by
which the provider agreement will be cancelled unless the state finds
that the facility has either come into compliance or has made
significant progress towards achieving compliance. 42 C.F.R.
442.111(c). A state may claim FFP for services provided to eligible
individuals at a facility from the effective date of the provider
agreement.
Until passage of the Omnibus Reconciliation Act of 1980 (ORA), Pub. L.
96-499, the Agency's authority to question state certification of
facilities participating solely in Medicaid was limited to examining
whether the state had followed proper procedures and had a provider
agreement in place during the period for which the state was claiming
FFP ("procedural look-behind"). In section 916(c) of ORA, the Agency
was given authority to conduct a substantive look-behind of state
certification of skilled nursing facilities and intermediate care
facilities, and to terminate approval for Medicaid participation of
facilities that it found to be out of compliance with federal standards.
We discuss these statutory provisions in greater detail below.
Factual Background
Winfield is a state owned and operated intermediate care facility for
the mentally retarded (ICF/MR) with a population of approximately 480
during the disallowance period. In 1986 the State had certified
Winfield with an approved plan of corrections and entered into a
provider agreement for the period October 1, 1986 to July 31, 1987, with
an automatic cancellation date of December 31, 1986. State Ex. 8.
During December 1986 the State resurveyed Winfield and rescinded the
automatic cancellation date. State Ex. 9.
On February 12, 1987, the Agency notified the State that during a survey
of Winfield that took place on January 26 - February 6, 1987, a federal
survey team found the State out of compliance with several standards of
participation for an ICF/MR facility. State Ex. 17. The survey
indicated that existing conditions at Winfield posed an immediate and
serious threat to the health and safety of residents. The letter
announced that if those conditions were not corrected by February 18,
the Agency would cancel approval of Winfield's eligibility to
participate in the Medicaid program as an ICF/MR facility, effective as
of the close of business February 18, 1987. The letter provided proper
appeal rights.
From February 16 - 18, 1987, a federal survey team revisited the
facility to determine whether conditions posing an immediate and serious
threat had been corrected. On February 18, 1987, the Agency notified
the State that Winfield's participation had been cancelled as of that
date, under section 1910(c) of the Social Security Act. State Ex. 25.
It advised the State that FFP would be allowed, for persons in residence
on and before February 18, only for 30 days after February 18, 1987.
The Agency followed up this letter on March 5, 1987, listing all
deficiencies discovered during the January 26 - February 6, 1987 and
February 16 - 18, 1987 surveys of Winfield. State Ex. 29.
HCFA surveyors conducted a follow-up survey on March 16 - 20, 1987. The
Regional Administrator stated in a letter dated March 25, 1987 that the
serious threat to patient health and safety had been lifted, and he
asked the State for a plan, within a few days, to overcome the other
deficiencies. The letter stated:
Because of the actions taken and planned, your Department
may issue a Medicaid provider agreement to the Winfield
State Hospital and Training Center for the period March 21,
1987, through June 30, 1987. Prior to June 30, 1987, my
office will conduct a full survey of the Winfield State
Hospital and Training Center to assess compliance with
Federal regulations.
State Ex. 31.
There is no dispute that the State did not issue a provider agreement
after receipt of this letter; instead, the State simply notified its
fiscal agent, who had been notified of the cut-off of FFP due to the
Agency's termination letter, that Winfield's provider agreement was
modified to change the certification dates to the period March 21
through June 30, 1987. State Ex. 32.
During May 1987 the Agency again surveyed Winfield and again proposed
cancellation of its Medicaid eligibility. It rescinded its proposed
cancellation after a resurvey found that the immediate and serious
threat conditions had been rectified. The State was informed that there
were still continuing deficiencies at the facility and that the Agency
requested within the next few days an action plan for eliminating
deficiencies with a timetable for correction. Thus the status quo ante,
established on March 25, 1987, continued.
On June 8, 1987, the Agency notified the State that Winfield did not
meet active treatment requirements for participation as an ICF/MR
facility. State Ex. 35. Therefore, the Agency proposed cancelling
Winfield's Medicaid participation effective August 14, 1987, unless the
deficiencies were corrected. Meanwhile, HCFA's current approval of the
facility (due to expire on June 30, 1987 by the terms of the March 25
letter) was extended to August 14, 1987. On July 7, 1987, the State
requested a hearing before the Social Security Administration's Office
of Hearings and Appeals (OHA) pursuant to section 1910(c)(2), concerning
this June 8 letter. State Ex. 38.
The Agency's August 11 - 14 survey found that there were still active
treatment deficiencies. State Ex. 39. Therefore, the decision to cancel
Winfield's participation as a Medicaid ICF/MR, as of August 14, 1987,
was not rescinded, and the State's OHA appeal of the original June 8
determination continued.
On May 20, 1988, the Agency notified the State that it could find no
evidence that the State had a Medicaid provider agreement issued to
Winfield at any time since cancellation of the previous one on February
18, 1987. State Ex. 45. The State was asked to present any explanation
and evidence to refute HCFA's belief that since February 18, 1987,
Winfield had been without a valid Medicaid provider agreement.
On June 23 and June 27, 1988, the State requested the Agency to survey
Winfield during the week of July 18, 1988, to determine whether federal
standards were met. Agency Exs. 5 and 6. Meanwhile, the Agency wrote
the State on July 12, 1988, that since it had been determined that there
had not been any Medicaid provider agreement with Winfield since
February 18, 1987, the decision on June 8, 1987 to cancel Winfield's
participation effective August 14, 1987, was moot. Agency Ex. 7.
On July 7, 1988, the Agency issued a disallowance of FFP for Winfield
for the period February 18, 1987 to June 30, 1988. State Ex. 37. The
State appealed this disallowance to the Board and sought clarification
of the amount and basis of the disallowance.
The survey of Winfield that the State had requested was conducted by the
Agency on July 19 - 22, 1988, and reported July 28, 1988. Agency Ex. 8.
On August 19, 1988, the State adopted HCFA's findings from the July 19 -
22 survey of Winfield, certified the facility as an ICF/MR in Medicaid
effective August 19, 1988, and issued a provider agreement for August
19, 1988 - July 31, 1989. Agency Ex. 9.
On August 24, 1988, the Agency issued a letter clarifying the basis and
amount of the July 7, 1988 disallowance. State Ex. 46. On January 30,
1989, the Agency issued a further disallowance for the period from July
1, 1988 to August 18, 1988. Attachment to Notice of Appeal, Board
Docket No. 89-40.
Analysis
Winfield's provider agreement was terminated for federal purposes on
February 18, 1987.
Section 916(b)(2) of ORA amended section 1910(c) of the Act to provide:
(1) The Secretary may cancel approval of any skilled nursing
or intermediate care facility at any time if he finds on the
basis of a determination made by him as provided in section
1902(a)(33)(B) that a facility fails to meet the
requirements contained in section 1902(a)(28) or section
1905(c), or if he finds grounds for termination of his
agreement with the facility pursuant to section 1866(b). In
that event the Secretary shall notify the State agency and
the skilled nursing facility or intermediate care facility
that approval of eligibility of the facility to participate
in the programs established by this title and title XVIII
shall be terminated at a time specified by the Secretary.
The approval of eligibility of any such facility to
participate in such programs may not be reinstated unless
the Secretary finds that the reason for termination has been
removed and there is reasonable assurance that it will not
recur.
(2) Any skilled nursing facility or intermediate care
facility which is dissatisfied with a determination by the
Secretary that it no longer qualifies as a skilled nursing
facility or intermediate care facility for purposes of this
title, shall be entitled to a hearing by the Secretary to
the same extent as is provided in section 205(b) and to
judicial review of the Secretary's final decision after such
hearing as is provided in section 205(g). Any agreement
between such facility and the State agency shall remain in
effect until the period for filing a request for a hearing
has expired or, if a request has been filed, until a
decision has been made by the Secretary; except that the
agreement shall not be extended if the Secretary makes a
written determination, specifying the reasons therefor, that
the continuation of provider status constitutes an immediate
and serious threat to the health and safety of patients, and
the Secretary certifies that the facility has been notified
of its deficiencies and has failed to correct them.
(Emphasis added.) In the preliminary analysis, we characterized the
State's interpretation of this provision as follows:
The State contended that section 1910(c)(2) of the Act did not
give the Agency unilateral authority to terminate a facility's
participation in Medicaid. Instead, the State argued, the
effect of the Regional Administrator's February 18, 1987
letter cancelling approval for Winfield's participation in
Medicaid was to direct the State to set in motion its
procedure for terminating the facility's provider agreement.
In its comments on the preliminary analysis, the State asserted that
this statement mischaracterized its position and that it in fact
acknowledged that the termination letter ended Winfield's participation
in Medicaid without further state action. The State noted, however,
that the provider agreement continued to exist as a contract between
Winfield and the State. 3/ The State contested what it saw as the
preliminary analysis' finding that the provider agreement was
automatically terminated for all purposes.
We need not disagree with the State's position here (nor, apparently,
does the Agency 4/) that the effect of the termination order was to
terminate the provider agreement for federal purposes so that FFP was
immediately cut off. In the preliminary analysis the Board recognized
that a provider agreement is a contract between the State and the
provider (see n. 4 of preliminary analysis); we merely disagreed with
the State's implication that the provider agreement could somehow
survive for federal purposes during the required state appeals process.
Since the State has now explicitly stated that it agrees that Winfield's
provider agreement was terminated for federal purposes on February 18,
1987, there is no need to discuss this issue further.
Consequently, we affirm our preliminary conclusion (with which it now
appears both parties substantially concur) that the effect of the
February 18 letter was to cut off immediately Winfield's federal
Medicaid participation. The Regional Administrator lawfully extended
FFP for Winfield during the period February 18 to March 20, 1987.
In his February 18, 1987 termination letter, the Regional Administrator
stated that --
Federal funding for inpatient services rendered to residents
admitted on February 18, 1987 or earlier is limited to 30
days after February 18, 1987. You should submit, as soon as
possible, a list of recipients in your facility as of
February 18, 1987 and their Medicaid identification numbers,
to . . . [the State] to facilitate payment of bills for
these individuals.
State Ex. 25. The State informed its fiscal agent that Winfield was
decertified as of March 20, 1987, so that no further claims for FFP
would be filed after that date. State Ex. 26.
The Agency's disallowance included the period February 18, 1987 through
March 20, 1987 because there was no effective provider agreement during
that period. Notwithstanding the Regional Administrator's explicit
statement that FFP would be continued for services at Winfield for 30
days after termination of its provider agreement, the Agency contended
in its briefs filed prior to the preliminary analysis that there was no
statutory or regulatory provision authorizing that practice and that
therefore it could not lawfully provide FFP for this period.
We found in the preliminary analysis that 42 C.F.R. 441.11, which
provides for a 30-day period of FFP for transfer of patients after a
state termination of a facility's Medicaid participation, had been
interpreted by the Agency to cover federal terminations as well. See
Revision No. 8 to the Regional Office Manual, Exhibit 4-97 (attached to
Agency's Interrogatory Responses) and State Medicaid Manual section
2084.3. Evidence in the record shows that the Regional Administrator
had relied on this interpretation as authority for the extension and
that the State had transferred some patients during this period. We
therefore tentatively concluded that this was the Agency interpretation
to which we owed deference, and consequently, we suggested that the
disallowance for the 30-day period following termination of Winfield's
provider agreement be overturned. The Agency did not directly address
this tentative conclusion in its comments or during the telephone
conference following the preliminary analysis. (We note, however, that
the General Accounting Office report which the Agency introduced in
support of another proposition (Agency Ex. 20) agreed with our
conclusion.) Consequently, we affirm our conclusion that the
disallowance for Winfield for this 30-day period should be overturned.
The Regional Administrator's March 25, 1987 letter may form the basis
for a new provider agreement for Winfield effective March 21, 1987.
The Agency argued that the Regional Administrator's March 25, 1987
letter, which stated that the State could issue a provider agreement for
Winfield with the effective dates of March 21 through June 30, 1987, was
meant only to give the State permission to survey, certify and issue a
new provider agreement for Winfield -- not to reinstate unilaterally
Winfield as a Medicaid provider. In the preliminary analysis, we found
that the Agency's reading of section 1910(c), as intentionally
withholding authority to reinstate a provider from the Secretary and his
delegates, does not square with the plain language of section
1902(a)(33)(B), which defines the Agency's look- behind authority. That
section provides:
. . . if the Secretary has cause to question such
determinations [by the State that a provider meets the
requirements for participation in Medicaid], the Secretary
is authorized to validate State determinations and, on that
basis, make independent and binding determinations
concerning the extent to which individual institutions and
agencies meet the requirements for participation.
Section 1902(a)(33)(B) (emphasis added). We tentatively concluded that
the record as it stood then indicated that the Regional Administrator
had made such an independent and binding determination that conditions
at Winfield had improved to the point that he was willing to authorize
its reinstatement into the Medicaid program effective March 21, 1987.
Based on the circumstances surrounding the March 25 letter, we surmised
that the Regional Administrator intended to certify Winfield and did not
in fact expect the State to undertake an additional survey and
certification process prior to issuing a new provider agreement to
Winfield. Consequently, we tentatively concluded that the Agency should
accept the State's offer to backdate a provider agreement for Winfield
to March 21, 1987.
Evidence introduced into the record since our preliminary analysis
confirms that the Regional Administrator interpreted his section
1902(a)(33)(B) authority to include the ability to reinstate Winfield's
participation in the Medicaid program without further State action.
Specifically, in the General Accounting Office Report (GAO Report)
introduced by the Agency as part of its comments on the preliminary
analysis, the Regional Administrator was cited as asserting that the
ordinary state survey and certification procedures did not apply in the
case of a federal termination and reinstatement of a facility. See
"MEDICAID Federal Oversight of Kansas Facility for the Retarded
Inadequate" (Agency Ex. 20) at 29-30.
The Agency did not dispute the conclusion in the preliminary analysis
that the Regional Administrator intended, when he wrote his March 25
letter, to permit reinstatement of Winfield as a Medicaid provider
without a State survey. The Agency, however, continued to argue (and
the GAO Report concurred) that the look-behind provision only gave the
Regional Administrator the authority to validate a State survey and
terminate a facility on the basis of his findings; it did not grant him
authority to certify Winfield himself. Thus, the Agency argued, the
March 25 letter should be read only to give permission to the State to
conduct the requisite survey and certification. Since no State survey
and certification subsequently occurred, the Agency maintained that
there was no evidence of certifiability and that therefore a backdated
provider agreement, which must be based on a proper certification, could
not be issued. The Agency introduced its surveyors' report of the March
16 - 20 revisit as evidence that this Agency survey was limited to
determining whether the serious and immediate threat to patient health
and safety had been lifted. This survey did not, the Agency contended,
demonstrate that the facility met the conditions for participation for
an ICF/MR, which the Agency considered essential for reinstatement of
Winfield as a Medicaid provider. Thus, the Agency concluded, the March
25 letter could not be used as a basis for a backdated provider
agreement.
Nothing that has been argued or introduced since the preliminary
analysis persuades us that the Regional Administrator lacked authority
to modify his earlier decision to terminate (based on the new survey and
the other evidence before him) and to make a binding and independent
determination to reinstate Winfield as a Medicaid provider without
further State action. While we recognize the distinction that the
Agency drew between rescinding a termination order based on a finding
that a serious and immediate threat did not exist at the time of
termination and approving reinstatement based on a finding that an
existing serious and immediate threat had been abated, we do not agree
that the statute on its face denies the Secretary the authority
unilaterally to reinstate a facility. In fact, section 1910(c) so
clearly contemplates a continued federal role in determining the
certifiability of a terminated facility that the Regional
Administrator's interpretation of his delegated authority appears at
least as reasonable as the interpretation the Agency presses here.
Moreover, although the Agency maintained that its interpretation of its
reinstatement authority is the only one consistent with the overall Act,
it apparently found it necessary on January 26, 1988 to issue a
memorandum to its regional offices clarifying this interpretation to its
program officials as Agency policy. GAO Report at 31. 5/
The Agency complained that our interpretation of its authority
overturned longstanding Agency policy as to the proper roles of the
federal and state agencies in Medicaid certification, and it also argued
that it was "implausible" for Kansas to suggest that it was unaware
of
"HCFA's interpretation of the 'look-behind' statutes and the respective
responsibilities of the State and Federal governments." Agency response
to preliminary analysis at 9. As we noted above, however, the Agency
did not deny that its Regional Administrator, who had been duly
delegated the Secretary's look-behind authority, definitely shared
Kansas', not the Agency's present, view that all the March 25 letter
required the State to do to receive FFP for the period starting March
21, 1987 was to submit the agreed-upon plan of corrections. 6/
Finally, we note that while the Agency was arguing that it could never
take the place of a state as surveyor and certifier, the Agency never
denied that the situation in Illinois Dept. of Public Aid, DAB No. 724
(1986), was an example of just such an instance of Agency action.
(Instead, as we discuss below, the Agency argued that the case was
distinguishable on its facts from the present one.)
We therefore conclude that the Agency's present interpretation of the
Regional Administrator's authority as being limited to approving a State
initiative to recertify Winfield was not the only permissible reading of
the statute and was not disclosed to the State until this disallowance
proceeding began. Thus, although we do not find HCFA's interpretation
of the look-behind provisions unreasonable per se, we find that it
should not be imposed retroactively in the face of the State's and
HCFA's own official's interpretation of arguably equal reasonableness.
We therefore conclude that the March 25 letter was intended to and could
be used as a basis for a provider agreement.
The Agency argued in the alternative that the March 25 letter could not
serve as certification of Winfield because the survey upon which it was
based was only done to ascertain whether the serious and immediate
threat conditions had been remedied. The Agency argued that a more
thorough survey was needed to determine whether the facility met the
Medicaid conditions for participation. It distinguished the Illinois
case as having involved such a detailed federal certification survey
that was conducted prior to the effective date of termination of the
facility's provider agreement. The State protested that the Agency was
introducing a new basis for the disallowance -- that Winfield did not
meet conditions for participation. The State noted that the look-behind
provision focused on whether the threat was lifted and whether
reasonable assurance on non-recurrence existed as conditions precedent
for reinstatement. In other words, the State contended that nothing in
the statute requires total compliance by a facility as a precondition
for reinstatement by the Secretary. Furthermore, the State contended
that the GAO Report indicated that the Regional Administrator's decision
was based on the entire file for Winfield, GAO Report at 42, so that his
determination was not based solely on the survey that the Agency now
claims was an insufficient basis to determine certifiability.
The GAO Report, which was added to the record for this case after the
preliminary analysis, does indeed describe the Regional Administrator's
decisions to terminate and reinstate Winfield as focusing on the serious
and immediate threat conditions. GAO Report (Agency Ex. 20) at 38 - 42.
He was reported as having affirmatively concluded prior to issuing the
March 25 letter that there were no longer conditions, either
individually or considered as a whole -- constituting a serious and
immediate threat to patients at Winfield. Id. at 42. However, a
necessary implication of the Regional Administrator's authorization of
the resumption of FFP for Winfield was that he considered that the
facility substantially complied with standards for an ICF/MR. HCFA
guidance required a finding of substantial compliance with conditions
for participation, not just a finding that the serious and immediate
threat had lifted, and the record demonstrates that the Regional
Administrator had sufficient evidence to make this finding.
Specifically, the Regional Administrator had before him the record of
three extensive federal survey visits and additional evidence from the
State about conditions at Winfield, and he referred in his March 25
letter to "the actions taken and planned" by the State, as reported
to
him in his March 23 meeting with State officials. He also alluded to a
future federal "full survey . . . to assess compliance with Federal
regulations" prior to the expiration of the period authorized by him for
Winfield's provider agreement, implying that he judged the evidence
before him to be sufficient to support certification until that date.
See GAO Report at 29-30. Although it is true that in the Illinois case
the Agency's letter reporting the results of its survey was more
explicit in stating that it was meant to certify the facility's
compliance, it is clear that the intent of the author in this case was
the same. In addition, as we noted in the preliminary analysis, it
would have been redundant and irrational for the State to conduct what
would have been essentially a "look-behind" survey of the federal
surveys.
Thus, while information provided since the preliminary analysis has
shown as faulty our assumption that the Regional Administrator's March
25 determination was based solely on the March 16 - 20 survey, there is
more than enough evidence to conclude that the Regional Administrator
meant to, and did, certify Winfield's compliance in his March 25 letter.
We therefore conclude that the State may submit a backdated provider
agreement for the period March 21 through June 30, 1987. Accordingly,
the disallowance for this period is overturned.
Winfield's March 21, 1987 to June 30, 1987 provider agreement was
extended through August 18, 1988.
Following the Regional Administrator's March 25 letter, the Agency
commenced two more termination proceedings. The Agency's May 22, 1987
notice of cancellation, which was based on a new finding of an immediate
and serious threat to patients due to inadequate nurse staffing, was
rescinded by the Agency after a May 28 survey. The Agency's June 8,
1987 notice of cancellation, which was not based on a serious and
immediate threat to patient health and safety, specifically noted that
FFP would continue beyond the proposed termination date of August 14,
1987, until the Secretary issued a final determination on any appeal, if
the facility filed a timely appeal of that determination under section
1910(c)(2) of the Act. On July 7, 1988, the State filed an appeal with
the OHA.
The Agency submitted a letter dated July 12, 1988, from the Regional
Administrator to the State in which he stated that because his June 8,
1987 decision to cancel approval of the State's provider agreement was
based on the assumption that the State had issued a new provider
agreement after February 18, 1987, and he had now determined that no
such agreement was ever issued, the question of whether the June 8, 1987
decision was correct was moot. Agency Ex. 7. That letter also
indicated, however, that the State's appeal was still pending as of that
date. In fact, the appeal was not dismissed until October 24, 1988.
Agency Ex. 12.
Given our conclusion above that the State may issue a backdated provider
agreement for Winfield for the period March 21, 1987 to June 30, 1987,
it is ineluctable that this provider agreement would continue by
operation of law until the appeal of its termination was dismissed or
until superseded by a later provider agreement. Resolution of the appeal
was apparently delayed with the Agency's consent (see State Ex. 47 at 2)
after the Agency had specifically acknowledged that FFP would continue
until the appeal process was completed. State Ex. 39. Since the
Agency's disallowance for the period March 21, 1987 to August 18, 1988
was based on the nonexistence of such a provider agreement, we concluded
in the preliminary analysis that the disallowance must be reversed for
that period.
The Agency did not contest this analysis and we therefore adopt it as
the final determination on this issue.
The Agency is not barred by this decision from taking a disallowance for
services to particular residents.
We stated in the preliminary analysis that:
We wish to emphasize that our tentative determination that
this disallowance cannot be upheld is based on our conclusion
that a blanket disallowance for all patients at Winfield
during the entire period cannot be sustained on the record as
it now stands. In other words, the basis alleged for this
particular disallowance -- that the State failed to show
evidence of a provider agreement for this period -- is
rejected. On the other hand, the State has certainly admitted
that there were problems at this facility during this period,
and, even if our tentative determination becomes the final
Decision of the Board, the Agency is free to disallow FFP
claimed for Winfield patients based on other findings, e.g.,
of a failure to provide active treatment to individual
patients at Winfield.
The State raised a number of objections to the institution of further
enforcement proceedings on these matters which the Agency may wish to
consider if it decides to pursue this matter. Since our statement was
merely intended as a clarification of the scope of our decision, not a
recommendation for prosecution, we do not believe that this statement
needs to be revised or stricken.
Conclusion
Based on the foregoing analysis, it is the Board's final conclusion that
the Agency's disallowance of $15,765,066 should be overturned.
_____________________________ Judith A. Ballard
_____________________________ Donald F. Garrett
_____________________________ Norval D. (John)
Settle Presiding Board Member
1. Board Docket No. 88-147 is the appeal of a disallowance of
$12,578,811 for the period February 18, 1987 through June 30, 1988.
Board Docket No. 89-40 is the appeal of the $3,186,255 disallowance for
the period July 1, 1988 through August 18, 1988.
2. The circumstances underlying the termination order are the subject
of an appeal before the Social Security Administration's Office of
Hearings and Appeals (OHA). Agency Exs. 11, 13. In an April 7, 1989
ruling, the Board Chair concluded that the Board did not have
jurisdiction to rule on the merits of the State's contentions that the
termination order was faulty, since jurisdiction over that dispute lies
with OHA. He further ruled that in this proceeding the Board would take
the termination order as a given, and would confine its deliberations to
the effect of that order.
3. The State's regulations provide for notice and an opportunity for
hearing before termination of a provider agreement is given effect.
Kansas Administrative Regulations section 30-5-60(c). The State
commenced termination proceedings, but it suspended them when it learned
that the Agency might rescind its February 18 determination, and it
abandoned the proceeding when the Agency authorized reinstatement of
Winfield.
4. The Agency did not comment on this part of the preliminary analysis
and, consequently, we presume that it concurred with our description of
its position as maintaining "that the February 18 letter automatically
terminated Winfield's provide agreement for federal purposes and that no
further action was required." Preliminary Analysis at 8.
5. The Agency's January 26, 1988 memorandum to its regional offices
adopting its interpretation apparently clarified the proper procedures
to be followed by regional administrators in exercising their delegated
authority in these cases. Consequently, the Agency's concern that the
Board's adoption of the interpretation used by the Regional
Administrator in this particular case will lead to federal intrusion
into state survey and certification responsibilities appears unfounded.
6. Although the regulations do not permit backdating of a provider
agreement to a date earlier than the date an acceptable plan of
correction is submitted for any uncorrected deficiencies, here the
Regional Administrator clearly indicated that he had found the
facility's plans to be a basis for FFP. The provision of a written
plan, which the State submitted to the Regional Administrator on April
15, 1987 (Agency Ex. 21) and which he apparently viewed as confirming an
earlier understanding (he never formally accepted or rejected it), was a
mere technicality in this