Washington Department of Social and Health Services, DAB No. 282 (1982)

GAB Decision 282

April 23, 1982 Washington Department of Social and Health Services;
Docket No. 81-44-WA-HC Garrett, Donald; Settle, Norval Teitz,
Alexander

The State of Washington Department of Social and Health Services
(State, DSHS) appealed the disallowance of $999,711 in federal financial
participation (FFP) by the Health Care Financing Administration (HCFA,
Agency). The disallowance was for FFP in expenditures for four
Intermediate Care Facilities for the Mentally Retarded (ICF/MRs) during
periods when the Agency claimed no valid provider agreements existed for
these facilities. These periods were between the July 18, 1977
effective date for ICF/MR services in the Grantee's State plan and the
respective dates on which the Agency claimed the individual facilities
were certified.

The four ICF/MRs, all State-owned, are Rainier, Lakeland, Fircrest,
and Frances Hadden Morgan Center (FHMC). Two of the facilities, Rainier
and Lakeland, were the subjects of prior appeals by the State which were
decided by this Board in Decision No. 176, May 26, 1981. /1/

Our decision in this appeal is based on briefs and submissions of the
parties; the response of the parties to an Order to Develop the Record;
the transcript of a hearing held in Washington, D.C.; and the record of
the appeals in Decision No. 176, which was incorporated in this case by
agreement of the parties.

Background

Under applicable regulations, in order for a state to obtain FFP for
payments for Medicaid patients in an ICF or SNF, there must be a valid
provider agreement. This is an agreement between the single state
agency (designated by the state to administer or supervise the
administration of the state Medicaid plan) and the facility. Before a
provider agreement can be valid, the state (2) survey agency (ordinarily
the state authority which licenses health facilities) must certify the
facility. A facility may be certified with defects provided (1) the
survey agency finds that the deficiencies do not jeopardize the health
and safety of the patients, and (2) the state survey agency accepts a
plan of correction or a waiver has been granted. There may be a plan of
correction as to some requirements and a waiver as to others.

The plan of correction not only lists the deficiencies found but also
sets up a plan for correcting them within a definite time schedule. If
the state survey agency finds the plan of correction to be acceptable,
it then certifies the facility on a Certification and Transmittal form
(Form 1539, C&T). The last item to be completed by the state survey
agency is Line 18, state survey agency approval, with space for a
signature, and the title of the person signing. Line 19 has space for
the date of the state survey agency approval to the right of the
signature on Line 18. There is a separate line (11) for the period of
certification. The single state agency enters into the provider
agreement with the facility based upon the certification. The provider
agreement may have its effective date backdated, but no earlier than the
date of certification. See, generally, 42 CFR Part 449 (1977); 42 CFR
Part 442 (1978) (relevant provisions are quoted below).

Statement of Facts

In Washington the Health Services Division has the responsibility for
certifying ICF/MR facilities under applicable federal regulations for
Medicaid. The disallowance letter gives the following pertinent dates
for the various facilities, which were not disputed by the State:

Survey Plan of C&T CompletedCorrection
Accepted Excuted Rainier 6/10/77 4/26/78
4/27/78 Lakeland 5/17/77 9/16/77 11/18/77 Fircrest
5/6/77 11/18/77 11/18/77 FHMC 5/11/77
10/8/77 11/30/77

In addition, the provider agreements all stated they were effective
July 18, 1977, /2/ and the State claimed FFP for ICF/MR services
beginning with that date.

(3)

The State's position was based on two principal grounds. The first
was that HCFA had interpreted the relevant regulations, 42 CFR 442.12(
a) and (b), "in an invalid manner, under law." The State disputed HCFA's
interpretation of the date of certification as effective when the C&T
form is executed by the state survey agency. The State further claimed
that 45 CFR 249.33(a)(8) allowed for the type of action taken by the
State, that its surveys were completed in advance of July 18, 1977 for
each facility, and that its activities fell within the exceptions in the
regulations mentioned above. (Appeal, p. 2)

The second major ground for the State's appeal was that of equitable
estoppel. The State claimed that it was informed by the Agency that
certification would be effective as of the date of the initial survey if
the facility was found "in substantial compliance to be certified."
(Id.) The State offered affidavits and oral testimony at the hearing in
support of its position.

Pertinent Regulations

42 CFR 442.12 (1978) provides as follows:

(a) A medicaid agency may not execute a provider agreement with a
facility for... ICF services nor make medicaid payments to a facility
for those services unless... the State survey agency has certified the
facility under this part to provide those services....

(b) The effective date of an agreement may not be earlier than the
date of certification.

For part of the period of this disallowance a similar earlier
regulation was in effect. 42 CFR 449.33(a)(6) (1977) required that a
state plan for medical assistance under Title XIX must provide:

that execution of the single State agency provider agreement with a
facility for payments under the plan shall be contingent upon
certification....

The State in its appeal and in its response to the Board's Order to
Develop the Record refers also to 45 CFR 249.33(a)(8). In the October
1, 1976 codification this required that a state plan provide:

during the period ending three years after the effective date of
section 249.13 that in the case of an institution... for the mentally
retarded... the single State agency will:

(4) (i) Prior to the execution of a provider agreement covering
intermediate care facility services, where the institution is not in
compliance with the standards specified in Sec. 249.13, obtain a written
plan of compliance which shall be submitted... by the institution to the
single State agency and approved by the Secretary, for achieving
conformity with the standards specified in Sec. 249.13. The plan of
compliance shall:

(A) Detail the extent of the institution's current compliance with
the standards prescribed in Sec. 249.13, and the specific action steps
required to achieve compliance with the standards...

* * *

(C) In the case of a public institution... for the mentally
retarded... provide for approval of the plan of compliance by the
State....

The history of section 249.33(a)(8) and its varying effective dates,
and its relation to this case, are discussed in the analysis below.

Discussion

I. Date of certification

The parties here continued to rely on the same arguments about the
date of certification that they relied on in the earlier Washington
Department of Social and Health Services cases decided in Decision 176.
The Agency continued to take the position that under 42 CFR 442.12(a)
and (b) the effective date of certification could never be earlier than
the date of execution of the C&T form by the state survey agency. The
State claimed this was an invalid interpretation. It again claimed that
it had relied on the information given it, that certification could
occur as of the date of the survey, if the survey disclosed that the
facility in question was then in substantial compliance with the federal
regulatory requirements.The estoppel claim is considered separately
below. On the issue of the date of certification, apart from the
possible effect of any estoppel, the Board here repeats its conclusion
in Decision No. 176, for the reasons there given, that the date of
certification may be earlier than the date of execution of the C&T form,
but only under certain specified conditions. It therefore becomes
necessary to consider the factual situation for the two facilities not
involved in Decision No. 176, namely, Fircrest and FHMC. For Rainier
and Lakeland, the Board makes the same findings (5) as in Decision No.
176. /3/ The date of certification for Rainier School was April 27,
1981, the same date the C&T form was signed. For Lakeland School the
date of certification was November 17, 1977, one day before the November
18 date of execution of the C&T.

A. Fircrest

The C&T form for Firecrest was not signed until November 18, 1977.
From the disallowance letter it appeared that the date of the acceptance
of the plan of correction for Fircrest was that same day. In its Order
to Develop the Record the Board requested the State to submit any
evidence it might have why the date of execution of the C&T form should
therefore not be accepted as the date of certification. In its response
the State repeated and elaborated on its arguments under 45 CFR
249.33(a)(8) and on equitable estoppel generally. It did not, however,
specifically address the question raised by the Board. The Board
therefore finds, based on Decision No. 176 and in the absence of
anything further offered to the contrary, that the date of certification
could not be earlier than the date of acceptance of a plan of
correction; in the case of Fircrest, this was November 18, 1977, the
same date the C&T was signed.

B.FHMC

The disallowance letter indicates that the plan of correction for
this facility was accepted on October 8, 1977 but the C&T form was not
signed until November 30, 1977. The parties were therefore asked to
furnish all documentation partaining to the survey and certification of
this facility, to see if there was any explanation for the delay.

The State submitted the C&T form for FHMC as well as the complete
statement of deficiencies and plan of correction. It also submitted a
sheet listing this facility and many others, giving various dates, (6)
but not otherwise identified. This gave for FHMC (here identified as
Frances H.M.C.C.) a date of 5-11-77 for the inspection, and 8-5-77 for
the correction plan. The column (F) for "Final Accept of POC" bears two
dates: "9-22-77 (health)" and "10-8-77 (fire)." (See, also Tr. p. 99)

The C&T form is not particularly illuminating.It indicates that the
period of certification was to begin on 7/18/77. The certification was
signed on 11/30/77 by John Gerth, giving state survey agency approval.
The form states compliance is based on an acceptable plan of correction,
and approved waivers of the requirements of the Life Safety Code and
number of beds per room. The plan of correction consists of some 21
pages. Many of the items seem minor and have a proposed completion date
of either July 1 or December 1, 1977. Waivers were requested for the
following items: use of one-way mirrors in rooms A & B; enlarging a
doorway; and simultaneous audible-visible warning signals. In
addition, capital budget requests were to be submitted to DSHS and the
State Legislature for funds to divide a long corridor into shorter
sections by smoke barriers; to widen resident rooms; and to install
electric hold open devices connected to the fire alarm system. These
items were given a completion date of July 1, 1980, and, in the only one
of these where a date was given for submitting the capital budget
request to the State Legislature, it was January 1978. A waiver or
"variance" was also requested from the requirement that bedrooms should
accommodate no more than four residents.

The Agency's response to the Order included the same November 17,
1977 memorandum from the Deputy Director of the Bureau of Developmental
Disabilities (BDD) to John Gerth, head of the state survey agency, which
was in the record in the prior Washington appeals. This indicated that
while all areas of concern regarding the availability of funds for
Fircrest and Lakeland had been answered in discussions that day, Gerth
still had a question regarding FHMC. The memorandum indicated that if
there was no additional funding through an appropriation at the
supplemental session of the legislature, the deficiencies for Fircrest
and FHMC would require funding from "Bill Leonard/Omnibus Act." The
significance of this document is that, as pointed out for similar
correspondence in Decision No. 176 (p. 6), the head of the survey agency
could not possibly have certified FHMC on October 8, 1977 (when the plan
of correction was accepted), when on November 17 he was still talking
about funding. Decision No. 176 also sets out (at p. 6) part of a
memorandum from Gerth to Norm Davis (Assistant Director, Planning and
Support Services, BDD, October 6, 1977) pertaining to Lakeland and
Fircrest School, which states that the State officials had received
information from "our federal counterparts" that a written commitment
that funds are available for correction of deficiencies "is required
prior to certification of state operated institutions."

(7) Again, as in Decision No. 176, the Agency submission which
explained the gap between the date of acceptance of the plan of
correction and the date the C&T was signed for FHMC was an approval of
the waiver requests.

It was not until November 30, 1977 that Gerth granted the waiver
requests. In his memorandum of that date to Norm Davis he refers to the
waivers requested in the "fire survey report dated June 14, 1977" and in
the "health survey report dated May 11, 1977." The Board, under the
reasoning of Decision No. 176, cannot say that all the necessary
requirements for certification were met until these waivers were
granted. Since the date of these waivers, November 30, 1977, is the
same day that the C&T form for FHMC was signed, we are not faced with
any consideration of notification of the state survey agency in advance
of the signing of the C&T. Based on Decision No. 176, the Board finds
that the date of certification of FHMC was November 30, 1977.

II. Estoppel

In this case the State articulated its equitable estoppel argument
more clearly than in the earlier Washington cases, and also presented
oral testimony at the hearing, where only affidavits were available for
Decision No. 176. Unfortunately, the exact details of a conversation or
meeting, as recalled some three or four years later, cannot be expected
to be fresh in the witnesses' memories, so some inconsistencies and
contributions can be expected, even from witnesses trying to tell the
truth. /4/

As in Decision No. 176, the Board does not believe that it is
necessary to reach the legal issue of whether the federal government can
be estopped by misrepresentations of an employee. The State's claim, as
in Decision No. 176, is in substance that the head of its survey agency
was told that the date of certification could be earlier than the date
of signing of the C&T. In fact, the representation was claimed to be
that the date of certification could be backdated to the last day of the
survey, where either all requirements were then met, or there was an
acceptable plan of correction which did not require that additional
corrections be accomplished before certification. However, even if this
was all represented by someone with authority to do so, it would make no
difference in the result because one important factor was not
considered. Where a waiver of a specific requirement was requested (8)
from the survey agency, the certification could not be complete until
the waiver request was granted. However, in view of the substantial
amounts of money involved, and the effort and expense by the State, the
Board will briefly review the relevant testimony.

The first witness for the State was Norm Davis, who at the time
covered by the disallowance was Assistant Director of BDD. He testified
on direct examination that the surveys were done in the spring of 1977,
and then there were continuing discussions with John Gerth, head of the
State survey agency, "about how to complete plans of compliance or plans
of correction." (Tr. p. 28) He had no direct conversation about the date
of certification question with John McFadden, the federal employee on
whose statements the State relies primarily for its estoppel claim. /5/
Davis stated that he was in John Gerth's office when Gerth spoke to John
McFadden, and he (Davis) got the impression from Gerth that McFadden had
said the effective date for FFP was the date of survey. This of course
cannot be of much evidentiary value alone, a witness giving his idea of
what someone else's conversation was. (Tr. pp. 31-32) In fact, Gerth
testified that he did not recall Davis being with him when he had the
particular conversation with McFadden, and that Davis had testified to
another conversation which he, Gerth, did not recall. (Tr. pp. 94-95)

Alberta Larsen's testimony on the McFadden conversation with Gerth
was similar to that of Davis. She said that she was in Gerth's office
with Davis when Gerth called McFadden, and after the phone conversation
was ended, Gerth reassured her and Davis that they could certify back to
the date of the survey.

So, as in Decision No. 176, John Gerth was the only State employee
who had first-hand knowledge of what McFadden said about certification
dates in reference to surveys. The substance of Gerth's testimony on
this point is that McFadden told him that certification of a facility
could be backdated to the last day of the survey under certain
circumstances. This was where the facility had an acceptable plan of
correction, and the deficiencies were not such that additional
corrections had to be made before certification (9) would be considered.
The reason for not certifying would be if there was jeopardy to the
health and safety of the patients. (Tr. p. 98)

The Board considers the failure of John McFadden to appear and
testify to be significant. No explanation whatever was offered for his
absence. In fact the Agency attorney refers offhand to McFadden's
affidavit in Decision No. 176 as being very clear that "he did not
attempt to interpret Medicaid policy for setting effective dates", and
this "clearly contradicts the testimony that he did so here today." The
attorney continued:

I just wanted to make that statement for the record, since Mr.
McFadden is not here. (Tr. pp. 170-171)

It was not reasonable to expect the Board to give substantial weight
to McFadden's affidavit without even mentioning some reason why he was
not present in person. It was obvious that McFadden's statements would
be critical. The State brought its witnesses some 3000 miles so they
could testify in person.The Agency brought witnesses who could testify
only to what happened after the periods of the disallowance but the
Agency could not bring McFadden or even explain his absence.

The Board would under the circumstances have had to infer that the
testimony of Mr. McFadden, if he had been present, would be unfavorable
to the Agency. /6/ However, that does not in and of itself add much to
the State's case. The Board in Decision No. 176 pointed out that it was
"significant" that McFadden did not in so many words deny saying
substantially what he is charged with saying, namely, that a C&T form
could be dated back if the facility were in fact in compliance on an
earlier date, based on a survey and a plan of correction. (p. 10) Even
if McFadden said this, there remained the fact that if waivers were
requested for certain requirements, the particular facility could not be
certifiable until the waivers were granted.

The Board, as in Decision No. 176, does not believe that what
happened at the meeting on July 14, 1978 of State and HEW staff was
significant. This was all after the fact. The extensive testimony
about this meeting cannot help support the State's estoppel claim. The
last C&T for these facilities was signed on April 27, 1978. Nothing
that anyone said in July 1978 could have caused the State to rely to its
detriment on the Agency (10) statements. Nothing at that date could
have caused the State to take its time in getting the C&T forms signed.

On the underlying issue of applying equitable estoppel, the Supreme
Court has spoken recently, though none too clearly. In Schweiker v.
Hansen, 450 U.S. 785 (1981), a Social Security employee had not complied
with instructions in a claims manual, and in response to an oral inquiry
had erroneously told claimant that she was not entitled to Social
Security mother's insurance benefits. Claimant therefore did not file,
although filing was a prerequisite to obtaining benefits. The Court
summarily reversed a court of appeals finding for claimant on the ground
of estoppel.

The decision does not give clear guidance. The Court states that it:

has never decided what type of conduct by a Government employee will
estop the Government from insisting upon compliance with valid
regulations governing the distribution of welfare benefits... (p. 788)

In considering equitable estoppel generally, the Court suggests, as
the dissent states, that estoppel may be justified in some
circumstances, but this is not such a case. (pp. 791-792)

There are three elements mentioned in the majority opinion as
pertinent factors which may be relevant here. The Court discusses the
possibility of "affirmative misconduct" being a basis for estopping the
federal government. The opinion also distinguishes cases where estoppel
"did not threaten the public fisc." (n. 4) As the dissent points out (p.
793), there is also in the decision (n. 4) an unclear distinction
between written statements and oral ones.

In the case before the Board we have no contention of "affirmative
misconduct" on the part of any government employee; applying estoppel
would certainly threaten the "public fisc", to the tune of about a
million dollars; and the alleged misrepresentations were all oral.
Taking all these factors into consideration, if the issue were reached,
this would probably not be the case where equitable estoppel would be
applied.

The Board in Decision No. 176 stated why it was not necessary to
consider estoppel for Rainier and Lakeland Schools. If the Agency
representatives did in fact mislead the State into relying on the belief
that the date of execution of the C&T form itself was not critical, we
still would not go back beyond the date of acceptance of a plan of
correction and an appropriate communication thereof. The regulatory
requirement for acceptance of a plan of correction is clear.

(11) The Board has said in Decision No. 176 that it will accept as
the date of certification of a facility a date prior to the date the C&
T form is actually signed under certain conditions. These are: that an
actual written plan of correction of any deficiencies be accepted in
writing by the state survey agency, that all requirements for
certification have been met, and the state survey agency takes steps to
notify the facility or the single state agency in writing of its actual
determination of certification. Since the Board would go no further in
the case before us now even if it did accept the State's claim of
estoppel as meeting both the legal requirements and the elements of
proof required, the result would be the same.

Specifically, the plan of correction for Rainier School was not
accepted until April 26, 1978. Acceptance was not communicated before
the C&T form was signed on April 27, so that is the earliest date the
provider agreement can be effective.

For Lakeland School, the plan of correction was accepted on September
16, 1977, but all requirements, both for funding and approval of a
waiver, were not met until November 17, 1977, when the facility was so
informed. Therefore the provider agreement is effective that day, even
though the C&T form was not signed until the next day.

The same factors applied to the other two facilities, namely,
Fircrest and FHMC, as discussed in I. above. For Fircrest there is no
problem at all, since the date of acceptance of the plan of correction
was the very same day the C&T form was signed. Even under estoppel, the
date of certification could therefore be no earlier than the date of
signing of the C&T.

For FHMC there was a sizeable period between the date of acceptance
of a plan of correction and the signing of the C&T. It appears,
however, that the final waiver necessary was not approved until the same
day the C&T was signed. It would make no difference if estoppel were
considered as applicable against the federal government. All
requirements for certification were not met before then. The acceptance
of a plan of correction did not remove the requirement that all waiver
requests be approved before the facility was in fact certifiable. The
State knew that the requirement existed, and so could not have been
misled by any representation to the contrary. In fact, on the C&T form
itself for FHMC, it appears that it was certified in compliance with
program requirements, and that compliance was based on both an
"accetable P.O.C." and "approved waivers" of certain listed
requirements. Until the waivers were approved the facility could not be
certified.

(12) III. The ICF/MR regulations

The manner in which the State in its appeal relies on 45 CFR 249.33(
a)(8) requires explanation:

(A)n examination of 45 CFR 249.33(a)(8) allows for the type of action
taken by DSHS as it proceeded to request FFP for each of its facilities.
(Attention is invited to 42 Federal Register 15063-15064.) DSHS contends
that its surveys were completed in advance of 18 July 1977 for each of
the facilities for which FFP is claimed. In addition, the plan of
action for compliance with Federal standards of which the personnel of
HCFA had been advised had been in existence for some time previous to
that July 18, 1977 date. (Appeal, p. 2)

Immediately prior to this sentence on p. 2 of the appeal, the State
contended that:

its plan to achieve such compliance as may have been necessary
through the determination of deficiencies during the survey was known to
HCFA in advance of not only the July 18, 1977 date but the March 18,
1977 date.

This somewhat jumbled contention is expanded and partly clarified in
the State's Response to the Order to Develop the Record, where it is
treated as akin to an estoppel argument. What the State seems to be
saying is that it was the duty of the Agency to notify the State of any
change in pertinent federal regulations, and failure to do so is grounds
for reversing the disallowance.

To understand the background of this argument and the significance of
the particular dates it is necessary to examine in some detail the
history of the regulations on ICF/MR certification. The general
background is given in the commentary on a later regulation set out in
46 Fed. Reg. 1268 et seq., January 6, 1981. This points out that
Congress in 1972 passed legislation (Pub. L. 92-223) that provided for
the first time coverage under the Medicaid program for services in ICF/
MRs. It outlines the various regulations providing extensions of time
for achieving full compliance with the final standards, and the
different times allowed in plans of correction for completing required
improvements. We are concerned here only with the beginning of this
period, which started in 1974, and ran through July 17, 1977.

Final regulations were published on January 17, 1974, 39 Fed. Reg.
2220, to implement Pub. L. 92-223. The detailed standards for ICF/MRs
were set out in 45 CFR 249.13 to be effective not later than 3 years
after the effective date of the regulation. Since the effective date
was March 18, 1974, the latest date for compliance would be March 18,
1977. As this date approached it was found (13) that many facilities
would be unable to meet the deadline. In fact, a study showed that only
35% of state-owned facilities were expected to be in full compliance by
the date set. (See, 42 Fed. Reg. 3325, January 18, 1977) Accordingly,
on March 18, 1977 there was published an amendment to 249.33(a)(8) which
extended the regulation to July 18, 1977 for certification of an ICF/MR
with a plan of correction. Then on June 3, 1977 new regulations were
issued prescribing new procedures for certifying ICF/MRs, giving new
time limits for compliance for a facility certified with deficiencies,
and specifically revoking 249.33( a)(8).

The first complaint of the State is that 249.33(a)(8) was revoked
"without prior notice." (State Response to Order to Develop the Record,
p. 2) It is not clear how publication on June 3 in the Federal Register,
that an extension for meeting requirements to July 18 had been revoked
effective July 18, is "without notice". The complaint seems to be
rather that "no notice of the change was given to DSHS." (Id.) The
charge is that Region X knew, or at least should have known, about the
changed regulation and should have told the State.

If anyone should have known about the alteration in 45 CFR 249.33(
a)(8), it would have been members of the staff of Region X, with whom
Mr. Gerth spoke. Their information was at variance with the position of
Region X, DHHS, as based upon the revocation of the above-noted federal
regulation... (Response, p.3)

It is not entirely clear, by any means, that Washington could have
avoided this disallowance even had it known earlier about the change in
the regulation. /7/ Nor does it appear that Region X knew about the
change and either carelessly or deliberately withheld the fact from the
State. The State refers in its response to a "single act of
misinformation" but there is no basis given for such a conclusion.

In any event, legally this would all make no difference. This is not
a situation where the Agency tried to impose the requirements of an
unpublished internal memorandum on the State. This was a change which
was duly published in the Federal Register. If the State was putting
many millions into the ICF/MR program it could reasonably be expected to
follow changes in the regulations on (14) its own initiative. It may be
unfortunate that the Region X officials, if they knew about the change,
did not specifically inform the State of it. There is no claim that the
Region deliberately withheld this information from the State. But in
any event it would not change the result of this appeal. To put it
rather tritely, "Ignorance of the law /8/ is no excuse."

CONCLUSION

Based on the analysis above, and on Decision No. 176, the
disallowance is upheld in full as to Rainier School, Fircrest, and FHMC.
The disallowance is upheld as to Lakeland School except for the one day,
November 17, 1977. /1/ Decision 176 is now under review by the U.S.
District Court for the Western District of Washington, No.
C81-1197R. Although the facts in Decision No. 176 and this appeal are
identical in some instances and similar in others, neither party wished
to await the outcome of the District Court litigation before proceeding
further here. /2/ In its Order to Develop the Record the Board
asked the parties to comment on the significance, if any, of the fact
that the provider agreements for three of the four facilities were
undated. The State did not comment; the Agency said there was no
significance in this case, where the C&Ts were dated. In any event, the
parties agreed that it was the date of certification that was the real
issue. (Tr. p. 18) /3/ The Agency has not specifically claimed
that the principles of either res judicata or collateral estoppel might
preclude the State from rearguing the certification dates for at least
Rainier and Lakeland, the two facilities involved in Decision No. 176,
although in closing argument at the hearing the Agency attorney did say
that Decision No. 176 is "dispositive" of the issues in the case. (Tr.
p. 176) The claim here is for expenditures for services for the same
time period as in the prior case, but represents FFP claimed in filings
for later quarters, or "increasing adjustments." In any event, no
significant new facts have been presented on the date of certification
for these two facilities and the Board makes the same determination for
them as in Decision No. 176. /4/ Unfortunately, despite the
millions of dollars involved, no one ever thought of confirming the
telephone conversations or the meeting in writing, or apparently even
making notes of them, either contemporaneously or later. /5/ The
Board has not considered the question of the authority of John McFadden
to bind the Agency to be significant, since based on its analysis it
does not matter whether he were so authorized. His authority to bind
the Agency is in fact very doubtful. The State's witnesses testified
that they considered him to be the Agency's liaison with the State on
certification requirements, but the uncontradicted Agency testimony is
that McFadden did not work for the Medicaid Bureau, and so had no
authority to interpret Medicaid policy. /6/ See, Dow Chemical
Co. v. S.S. Giovanella D'Amico, 297 F. Supp. 699, 701 (S. D.N.Y. 1969);
Playboy Enterprises, Inc. v. Chuckleberry Pub., Inc., 486 F. Supp. 414,
433 (S.D.N.Y. 1980). /7/ In its appeal the State claims that had
it been otherwise advised it could have taken steps to mitigate its loss
of FFP "by expediting the compliance process of seeking a waiver from
the Secretary." There is nothing in the record to show the State ever
took any steps to seek a waiver from the Secretary during the three
years the regulation was in effect. /8/ Properly promulgated
substantive agency regulations have the force and effect of law. See,
Chrysler Corporation v. Brown, 441 U.S. 281, 295 (1979).

SEPTEMBER 22, 1983