GAB Decision 188
May 31, 1981 Louisiana Department of Health and Human Resources; Docket
No. 78-127-LA-HC, 79-156-LA-HC Ford, Cecilia; Settle, Norval Garrett,
Donald
The Health Care Financing Administration (HCFA or Agency) disallowed
$3,295.84 in Federal financial participation (FFP) claimed under Title
XIX of the Social Security Act (Act) for the period from May 6 through
May 11, 1976. The State of Louisiana (State) appealed the decision
pursuant to 45 CFR Part 16 (Docket No. 78-157-LA-HC). The Agency issued
a subsequent decision which denied FFP in the amount of $54,916 for the
period from February 1, 1976 through May 5, 1976. The State also
appealed this disallowance under 45 CFR Part 16 (Docket No.
79-156-LA-HC). Inasmuch as both appeals involve the same parties, the
same basic issues, and the same facts, the cases have been considered
jointly for purposes of the Board's decision.
This decision is based on the State's appeals, the Agency's
responses, the Board's January 2, 1981 Order to show Cause, the parties'
responses to that Order, and informal conferences (on issues related to
this case) held by the Board on October 9, 1979 and February 11 and 12,
1981. /1/
(1)$UBackground
From January 19 through January 21, 1976, the Licensing Section of
Louisiana's Department of Health and Human Resources conducted a survey
of Summerlin Lane Nursing Home, an intermediate care facility (ICF), to
determine whether the facility was in compliance with State (2) and
Federal standards for providers of ICF services. The State survey
team's finding was that the Facility was in substantial compliance
although the team noted certain deficiencies. A plan of correction was
formulated and agreed to by the Facility's administrator. The State
renewed the provider agreement with the ICF on February 11, 1976 for the
period February 1, 1976 through January 31, 1977.
On March 16, 1976, the Agency, as authorized by the "look behind"
provision at 45 CFR 249.10(b)(15)(vi), conducted a survey of Summerlin
Lane to determine whether the ICF was in compliance with the Federal
requirements for such facilities as set forth in Title XIX and
implementing regulations. The Federal survey team found that there were
many deficiencies. In the opinion of the team, some of the deficiencies
constituted a hazard to the health and safety of the residents of the
facility. Based upon a comparison of the findings of the State and
Federal survey teams, the Agency concluded that the State had failed to
apply Federal standards for ICFs when it conducted its survey.
On March 24, 1976, the Regional Commissioner of the Social and
Rehabilitation Service (SRS) notified the State the SRS would not
consider the provider agreement with Summerlin Lane valid after April 5,
1976, but would continue FFP for 30 days after that date to allow for an
orderly transfer of the Medicaid patients to other facilities. (SRS was
responsible for administering Title XIX programs at that time.)
Officials of Summerlin Lane apparently stated that the facility
expected to have all the deficiencies corrected by April 8-9, 1976.
Federal officials agreed to resurvey the facility on those dates to
determine whether certification requirements were met. The Federal
survey team found, on April 9, 1976, that there were still deficiencies
which presented a hazard to the health and safety of the patients. The
survey team concluded that the facility had not demonstrated the ability
to maintain compliance with Federal standards.
In view of the Federal findings and proposed action, Summerlin Lane
filed a civil action naming the State as defendant. On April 19, 1976,
the United States District Court for the Western District of Louisiana
issued a preliminary injunction (Civil Action No. 76-0392) enjoining the
State from decertifying the facility or notifying the patients of the
decertification or the need to move, ". . . until such time as the State
has petitioned for and been granted an administrative hearing before the
proper agency, which hearing and any judicial review thereof shall
establish whether the H.E.W. action in cutting off funds provided to the
State is legally correct."
(3) The State, on April 22, 1976, requested reconsideration of the
Regional Commissioner's March 24 decision before the Administrator of
SRS, under the provisions of 45 CFR 201.14, on the grounds that the
surveys conducted by the Federal survey team did not establish that the
State was in violation of applicable Federal standards.
The State resurveyed the Facility on May 3-4, 1976. The survey
revealed that the ICF was still not in compliance with Federal standards
and could not be certified. On May 12, 1976, however, representatives
of Summerlin Lane, the State, and the Agency met and agreed upon a plan
of correction for the deficiencies reported during the May 3-4, 1976
survey. Accordingly, a three month certification was issued for the
period from May 12, 1976 to August 31, 1976.
On September 28, 1976, the Acting Regional Commissioner of SRS
amended the March 24 Disallowance decision by stipulating the specific
amount disallowed ($3,295.84). In all other respects the Regional
Commissioner's March 24 decision was unchanged.
On March 9, 1977, SRS was abolished and responsibility for
administering the Medicaid program was transferred to the then newly
created Health Care Financing Administration. Responsibility for
reconsidering Title XIX disalloances under 45 CFR 201.14 was transferred
to the Administrator of HCFA. On March 6, 1978, amendments to 45 CFR
201.14 (43 FR 9266) gave the State the option of continuing with
reconsideratoin under 201.14 before the Chairman of the Departmental
Grant Appeals Board or his designee, or of electing to have the
reconsideration proceed under 45 CFR Part 16 before the Board. The
preamble to the March 6, 1978 amendments stated the requirement that
before reconsideration could proceed, the Administrator of HCFA or his
designee must first issue a determination upholding the disallowance.
The Administrator of HCFA, on October 16, 1978, issued a decision
upholding the Regional Commissioner's March 24, 1976 disallowance of FFP
for the period from May 6, 1976 through May 11, 1976 on the grounds that
the State failed to apply the Federal standards for certification of an
ICF when it certified Summerlin Lane Nursing Home. The Administrator
also stated in the October 16 decision that, inasmuch as the provider
agreement executed by the State on February 11, 1976 could not be
considered evidence that the facility met all requirements for
certification, the State was not entitled to FFP for any payment made
under the terms of that agreement. The decision directed appropriate
Federal officials to determine whether Federal funds were claimed for
the period February 1, 1976 through May 5, 1976 so that action could be
taken if necessary to recover those funds.
(4) On December 15, 1978 the Regional Medicaid Director requested
documentation regarding Federal funding to Summerlin Lane for that
period, and Agency review of quarterly statements of expenditures for
the quarters ending March 31, June 30, and September 30, 1976 revealed
claims for FFP for ICF services provided at Summerlin Lane during the
period February 1 through May 5, 1976. By disallowance letter dated
June 21, 1979, the Director of the Medicaid Bureau notified the State
that its claim for FFP for services provided at Summerlin Lane during
the period from February 1 through May 5, 1976 was disallowed.
Improper Certification
The regulations in effect during the relevant period (45 CFR Part
249) governing medical assistance under Title XIX are specific as to
State plan requirements, standards for ICFs, and conditions under which
FFP is available. FFP in payments to a facility providing intermediate
care services is available only if the facility is certified as having
met all the requirements for participation in the Medicaid program as
shown by an agreement (provider agreement) between the single state
agency and the facility. (45 CFR 249.10(b)(1k)(i)(E).) The regulations
permit states to enter into a provider agreement with a facility which
fails to meet Federal Standards, so long as there is a plan of
correction at the time of the execution of such agreement that provides
for the correction of all such deficiencies or for waiver of certain
deficiencies. (45 CFR 249.33(a)(2); 45 CFR 249.12(a)(5).) While the
states have primary responsibilty for determining whether ICFs are in
compliance with all pertinent standards, the Federal agency retains the
right to assure that such standards are met. Section 249.10(b)(15)(vi)
is commonly referred to as the "look behind" provision because it
allows
the Federal agency to disregard the provider agreement, usually accepted
as an indication that the facility is in compliance with all
requirements for FFP. If on the basis of on-site validation surveys or
other Federal reviews the Agency finds that the State survey agency
failed to apply Federal standards or to follow applicable rules and
procedures, the Agency may determine that at the time of certification
the facility was not in compliance with Federal standards and therefore
was not eligible for FFP.
The State does not dispute the findings of the Federal surveys conduc
conducted in March and April 1976. The State argues, however, that
those surveys do not constitute proof that Federal standards were not
applied in January by the State survey team or that the facility was not
at that time in compliance with the Federal standards. We conclude that
the record does not support this agrument. In January the State found
the facility to be in violation of various requirements and approved a
plan of correction. In March the Federal survey team found numerous
other (5) deficiencies not listed in the plan of correction. Those
deficiencies included such things as failure to have a written and
rehearsed plan to deal with disasters (such as fires), insufficient
space and room for patient activities, and structural Life Safety Code
violations. (Response of the Health Care Financing Administration,
February 23, 1979, pages 14-15, hereafter referred to as HCFA Response.)
These deficiencies are of a nature such that if they existed in March,
they necessarily would have existed in January. Nevertheless, neither
the State survey nor the January plan of correction noted these
deficiencies.Had they been noted and made the subject of the January
plan of correction or waived, Federal standards might have been met and
the deficiencies would not necessarily be a basis for finding the
provider agreement invalid for purposes of FFP. (HCFA Response, pages
11, 12, 15.) Since the deficiencies were not noted and were not made
part of the January plan of correction or waived, the Board finds that
the provider agreement entered into in February is invalid in that the
survey upon which it was based failed to apply Federal standards. The
Agency properly determined that the facility was not in compliance with
Federal standards as of February 1, 1976, the effective date of the
provider agreement executed by the State on February 11, 1976.
The Agency has stated that 30 days of additional FFP would have been
available under 45 CFR 249.10(b)(15)(v) if the State had made a showing
satisfactory to the Secretary that it was attempting to relcoate
qualifying residents of the facility during the 30 days after the
termination of the provider argeement. (HCFA Response to Board's Order
to Show Cause, January 22, 1981, pp. 1, 3-4.) There is no indication in
the record that the State ever made such a showing and, therefore, it is
not entitled to FFP under 249.10(b)(15)(v).
The Agency's Determinations
As previously noted, the Regional Commissioner of SRS initially
notified the State on March 24, 1976 that the provider agreement for the
ICF would not be considered valid after April 5, 1976, but FFP would
continue for 30 days after that date to "allow for orderly transfer of
Mediciaid patients to other facilities." (Reconsideration Record, Tab
2.)
On October 16, 1978, the Administrator of HCFA upheld the Regional
Commissioner's disallowance of FFP beginning after May 5, while
informing the State that it was not entitled to FFP from February 1,
1976 (the effective date of the provider agreement executed on February
11), and on July 21, 1979, the Director of the Medicaid Bureau
disallowed FFP claimed for the period from February 1 through May 5,
1976.
(6) The State has argued that it was inappropriate for the Agency to
reverse its position for the period from February 1 through May 5 in
subsequent decisions. The State suggested that the Agency's action was
not in accordance with existing procedures for reconsideration of
disallowances (45 CFR 201.14). The Agency argued that it was not
prevented from correcting errors made at a lower level and issuing a
determination that was less favorable than the initial determination.
The State views the Agency's procedures as defective because the
disallowance was made over three years after the period involved. The
regulations, however, place no time limits on when disallowances can be
made except to say that they are to be issued promptly upon a
determination that a State's claim is unallowable. (See 45 CFR 201.14(
b)(1).) The State points to a letter dated April 22, 1977 fron an
Associated Regional Commissionr as evidence that the June 21, 1979
disallowance for the period February 1 through May 5, 1976 should have
been made more promptly. (See State's Response to Order to Show Cause,
February 11, 1981, p. 2.) The April 22, 1977 letter indicates that the
Agency at that time had access to the June 30 and September 30, 1976
quarterly expenditure reports, but does not show that the Agency had
then made a determination with respect to the State's claim for the
period February 1 through May 5, 1976.
The record shows that a determination on the State's claim was not
made until sometime after December 15, 1978 and that a disallowance
followed on June 21, 1979. The State has not presented any evidence or
argument as to why we should not consider this sequence to be "prompt"
issuance. Accordingly, we find that Agency fulfilled the regulatory
requirement.
The State views the Agency's procedures as defective because the June
21, 1979 disallowance changed the Regional Commissioner's earlier
position that FFP would be available through May 5, 1976. The
regulations do not restrict the Administrator from changing a position
taken by the Region in an initial disallowance. Nevertheless, the State
has raised an issue of estoppel, discussed below.
Estoppel
The State contends that the Regional Commissioner's March 24, 1976
letter (indicating that FFP would be available from February 1 through
May 5) estops the Agency from later disallowing FFP for that period.
/2/
(7) The Board need address the estoppel issue only for the period
February 1 to March 24, 1976, however, since the Board finds on other
grounds that FFP is available to the State for the period March 24 to
May 12, 1976. See discussion of court order, infra.
It is well established that a case of estoppel consists of specific
elements, including injury to one party caused by reliance on the
conduct of the other. Hampton v. Paramount Pictures, Corp., 279 F.2d
100, 104 (9th Cir. 1960); United States v. Georgia Pacific Co., Co.,
421 F.2d 92, 96 (9th Cir. 1970). It is also well established that
whether estoppel applies turns on facts which the party asserting
estoppel has the burden of proving. See, Choat v. Rome Industries,
Inc., 462 F. Supp. 728, 730 (N.D. Ga. 1978). The State has made only
broad allegations of estoppel without articulating the basis for the
argument or the reasoning behind it. Accordingly, the Board rejects the
State's estoppel argument. The Board notes, moreover, that the March 24
letter clearly caused no injury to the State with respect to the period
February 1 to March 24, 1976. Any loss of FFP to the State during that
period was caused by the State's own actions in failing to follow
Federal requirements, not by reliance on statements contained in the
March 24 letter.
Court Order
The question remains whether the April 19, 1976 injunction operates
to require the Federal government to provide FFP during any portion of
the period February 1 through May 11, 1976.
The Agency's regulations at 45 CFR 205.10(b)(3) make FFP available
for "payments of assistance within the scope of Federally aided public
assistance programs made in accordance with a court order."
The Board has previously applied Sec. 205.10(b)(3), in the context of
continued FFP during provider appeals. Ohio Department of Publc Health,
Decision No. 173, April 30, 1981, p. 11-12. Ohio concerned the effect
of a court order which required the State to continue making payments to
a facility pending a hearing on whether the State's decision to cut off
payments was correct. In Ohio the Board stated that:
(in) the instance of a provider appeal, the State's action would have
denied the facility the provider agreement needed for participation in
the Medicaid program. The court order overcomes the limiting effect of
that action but does not overcome other limits. If the State had made a
new agreement with the facility, we assume that the new term could not
have been longer than 12 months from that date because of other (8)
regulations calling for the annual survey/ certification cycle. In
ordering continued payments under the court-revived old agreement, the
court could not give that agreement greater effect than if the State had
approved the facility and made a new agreement. The "within the scope"
language thus limits FFP in court-ordered payments to a period of 12
months or completion of the next survey certification cycle, whichever
is sooner.
In this case, it appears to be Federal rather than State action which
denies the facility the provider agreement needed for Medicaid
participation. It is clear, however, that when the Federal government
invokes its "look behind" authority, it is making a determination
which
the State should have made but did not. Accordingly, we conclude that
the Ohio rationale applies in a "look behind" case such as this.
Underlying Sec. 205.10(b)(3) is a recognition that FFP should be made
available in the situation where the State, through no fault of its own,
is forced to pay for costs which would not normally meet program
requirements. The usual situation is that the State has taken some
action to deny payment to a recipient (or, in some instances, a
provider) because it has determined that a program requirement has not
been met. A court order, however, acts to overcome the program
limitation and to make FFP available, so long as payments are otherwise
within the scope of the program. Here, on the other hand, we have the
situation where the State failed to act in accordance with its
responsibility to ensure that Medicaid services are provided only in a
facility which meets Medicaid standards. The payments which the State
made to the facility between February 1 and March 24, were unallowable
under the regulations not only because the facility did not meet
certification requirements but also because the State had failed to meet
its responsibilities for certifying only facilities which met the
standards. Thus, even if we were to view the court order as giving
validity to the provider agreement as of February 1, we could not find
payments between February 1 and March 24 to be within the scope of the
program because the State failed during that period to take appropriate
action to decertify (or possibly enter into a plan of correction) as
Congress and clear program policy intended. On March 24, however, the
Federal government intervened and acted to in effect, decertify the
facility. The subsequent court order operated to stay the
decertification action so that the State could not have denied payment
based on the program requirement calling for certification. We see no
basis, therefore, for not giving the same effect to the court order,
from March 24 to May 12, which the order would have had if the State
itself had acted on March 24 to decertify the facility.
(9) The Board considers this result to be reasonable in that, if the
State had acted to decertify the facility on its own, presumably a chain
of events would have occurred similar to that which occurred after the
Federal action, and the period for which FFP would have been available
under the court order would have been approximately the same. Our
result also denies the State the benefit of FFP for the time period in
which its own failure to decertify potentially placed the patients'
safety at risk. We note here that our conclusion is based on the
factual finding that the State certified a facility improperly. If the
State had shown that the "look behind" provision had been incorrectly
invoke by the Agency, FFP would have been available for the entire time
period.
The record reveals that the State surveyed Summerlin Lane on January
19-21, 1976, prior to entering into a provider agreement on February 11,
1976 for the period February 1, 1976 through January 31, 1977; that the
court order was issued on April 19, 1976; that the next survey took
place on May 3-4, 1976; and that the determination on the findings of
the May 3-4 survey took place on May 12, 1976 when a three month
certification was issued pursuant to a plan of correction for
deficiencies found during the survey. Accordingly, pursuant to the
provisions of the April 19, 1976 court order, Sec. 205.10(b)(3), and
application of the Ohio rationale to the facts of this case, the Board
concludes that FFP is not available for the period February 1 through
March 23, 1976 but is available for the period March 24 through May 11,
1976.
Conclusion
The Board upholds the disallowance for the period February 1 through
March 23, 1976 and reverses the disallowance for the period March 24
through May 11, 1976. /1/ The Board invited Louisiana and 11 other
States to the February conference -- Colorado, Georgia,
Illinois, Michigan, Minnesota, Missouri, Nebraska, New York, Ohio,
Pennsylvaia, and Wisconsin. These 12 states had 50 cases pending before
the Board with provider appeal issues common to disallowances totalling
approximately $20 million and involving over 300 facilities. Louisiana
attended only the October 1979 conference but was sent transcripts of
and given an opportunity to comment on both conferences. /2/ The
Agency has conceded in this case that it may be bound by a prior
Regional opinion where the State has relied upon the opinion. (Agency
Response to Order to Show Cause, January 22, 1981, p. 5.)
OCTOBER 22, 1983