Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
|IN THE CASE OF|
Baylor University Medical Center,
|DATE: September 22, 2000|
- v -
Health Care Financing Administration
| Docket No.C-00-038
Decision No. CR701
The two cases that I decide here arise from separate hearing
requests. I am electing to issue consolidated decisions inasmuch as the
two cases involve common legal issues and very similar facts.
In Docket No. C-00-038, I find that Petitioner, Baylor
University Medical Center, proved that certain of its senior health centers
qualified under Medicare participation requirements to be certified as
provider based facilities as of the dates that these facilities opened.
I find that these senior health centers should be certified to participate
in Medicare effective the following dates:
Both Petitioners are affiliates of the Baylor Health Care
System. Petitioner in Docket No. C-00-038, Baylor University Medical Center,
is certified to participate in the Medicare program as a hospital. It
operates approximately 21 outpatient departments at which it furnishes
outpatient services to hospital patients. In the early 1990's it began
to receive requests to furnish specialized, geriatric, primary health
care outpatient services to elderly patients. In response to these requests,
beginning in 1993, it opened and operated senior health centers in and
around Dallas, Texas. These senior health centers include the Casa Linda,
Pleasant Grove, Preston/Sherry, Hillside, C. C. Young, and Fair Park facilities.
Petitioner in Docket No. C-00-075, Baylor Medical Center
at Richardson, also is a hospital that is certified to participate in
the Medicare program. This Petitioner operates several outpatient departments.
On April 21, 1995, it opened and operated the Baylor Richardson Senior
Health Center in Richardson, Texas. This senior health center was opened,
and is operated, to provide primary health care services to local elderly
Petitioners requested the Health Care Financing Administration
(HCFA) to certify their senior health centers, including the senior health
centers that I have identified by name in these decisions, as provider
based facilities. Petitioners requested that these senior health centers
be certified as provider based facilities beginning with their opening
dates. On February 11, 1999, HCFA notified Petitioners that it had determined
to certify these facilities as provider based. However, in the instances
of the named facilities, HCFA determined to certify each of them as being
provider based on a date that is later than the facility's opening date.
HCFA determined that senior health centers that are operated by Petitioner,
Baylor University Medical Center, should be certified to participate as
provider based facilities effective the following dates:
Petitioners requested reconsideration of these determinations.
HCFA affirmed its initial determinations. Petitioners then requested hearings.
The case docketed as C-00-038 was assigned to me. The case docketed as
C-00-075 was initially assigned to another judge, but then it was reassigned
The hearing request in C-00-038 was accompanied by 12
documents. The hearing request in C-00-075 was accompanied by eight documents.
While Petitioners referred to these accompanying documents as "exhibits,"
I identify them as attachments rather than exhibits because they were
submitted prior to the imposition of briefing schedules inviting the parties
to file exhibits.
The parties agreed that these cases could be heard and
decided without an in-person hearing and based on their written submissions.
Pursuant to a briefing schedule established by the judge initially assigned
to the case docketed under C-00-075, the parties submitted preliminary
briefs. The preliminary brief submitted by Petitioner in C-00-075, Baylor
Medical Center at Richardson, was accompanied by three proposed exhibits
which I identify as P.-00-075 Exs. 1 - 3.
Pursuant to a different briefing schedule that I established
after the case docketed as C-00-075 was assigned to me, the parties submitted
proposed exhibits and briefs in both cases. Petitioner in C-00-075, Baylor
Medical Center at Richardson, submitted 13 proposed exhibits with its
initial brief which I identify as P.-00-075 Exs. 4 - 16. Petitioner subsequently
withdrew one exhibit initially submitted by it and replaced this document
with a different exhibit under the same number. (Although Petitioner identifies
this document with the number 12, I have identified it as P.-00-075 Ex.
15). Petitioner also submitted a reply brief in C-00-075 accompanied by
two additional documents. I identify these as P.-00-075 Ex. 17 - 18. HCFA
offered six proposed exhibits with its initial brief in C-00-075 which
I identify as HCFA-00-075 Exs. 1 - 6. HCFA declined to file a reply brief.
Petitioner in C-00-038, Baylor University Medical Center,
submitted 22 proposed exhibits with its initial brief which I identify
as P.-00-038 Exs. 1 - 22. Petitioner in C-00-038 subsequently withdrew
four exhibits initially submitted by it and replaced these documents with
four different exhibits under the same numbers (P.-00-038 Exs. 8, 9, 10,
and 16). Petitioner also submitted a reply brief in C-00-038 accompanied
by two additional documents. I identify these documents as P.-00-038 Exs.
23 - 24. HCFA offered seven proposed exhibits with its initial brief in
C-00-038 which I identify as HCFA-00-038 Exs. 1 - 7. HCFA declined to
file a reply brief.
Neither party objected to the exhibits offered by the
opposing party. I receive into evidence P.-00-038 Exs. 1 - 24 and P.-00-075
Exs. 1 - 18. I also receive into evidence HCFA-00-038 Exs. 1 - 7 and HCFA-00-075
Exs. 1 - 6.
II. Issue, findings of fact and conclusions of
The issue in these cases is the dates on which the senior
health centers met HCFA's criteria for inclusion of the centers into Petitioners
as provider based facilities.
In this decision I do not address another issue which
I identified during the prehearing stage of these cases. At the inception
of these cases I expressed skepticism that I had authority to hear and
decide them. At first glance, these cases did not appear to me to involve
an issue that I had the authority to hear and decide, that being whether
HCFA incorrectly determined when to certify providers to participate in
Medicare. Rather, the cases appeared to involve an issue that I did not
have the authority to hear and decide, consisting of whether HCFA incorrectly
classified the status of the senior health centers for Medicare reimbursement
purposes. However, both parties urged me to hear and decide these cases.
I have decided not to consider the issue of whether I have the authority
to hear and decide them in light of HCFA's insistence that I do have that
I make findings of fact and conclusions of law (Findings)
to support my decision in these cases. I set forth each Finding below,
as a separate heading. I discuss each Finding in detail.
It is necessary at the outset of these decisions to clarify
what is at issue. Petitioners assert that what is at issue is the dates
on which the senior health centers qualified to participate in Medicare
as provider based facilities. Petitioners argue that the question that
I must decide is the dates on which the senior health centers should be
found to be integrated into Petitioners so that Petitioners could claim
reimbursement for the services that the senior health centers provided
as operating divisions of Petitioners.
HCFA asserts that what is at issue is the dates on which
the senior health centers should be certified to participate in Medicare
as providers of services. HCFA asserts, in effect, that what is at issue
here is the dates on when the senior health centers qualified in their
own rights as providers of care. It argues that, when Petitioners opened
the senior health centers, they opened new providers of care. It contends
that, in order to participate in Medicare, each of these senior health
centers had to be certified as satisfying all participation requirements.
HCFA contends that its determinations in these cases were determinations
that the senior health centers met participation requirements as of specified
dates. HCFA seems to argue that its conclusions as to the provider based
status of the senior health centers were made as an aspect of its determinations
that these facilities should be certified to participate in Medicare.
Finally, HCFA asserts that it deemed the senior health
centers to meet participation requirements on the dates that Petitioners'
accreditations by JCAHO were amended to include the senior centers. HCFA
argues that it could not have certified the senior centers to participate
at any earlier date inasmuch as HCFA relied on the JCAHO accreditations
as evidence that the senior health care centers met provider participation
requirements in lieu of conducting surveys of the senior centers to ascertain
compliance with participation requirements. See 42 C.F.R. §§ 488.4;
Below, at Finding 2, I discuss the significance of JCAHO
accreditation as a factor in determining whether a facility is provider
based. But, as a preliminary matter, I conclude that HCFA's characterization
of its determinations in these cases is incorrect.
Contrary to HCFA's assertions, HCFA did not evaluate,
nor did it certify, the senior health care centers to participate in Medicare
as freestanding providers of care. The health care centers never were
separate facilities and could not be certified to participate as freestanding
providers of care. The senior health centers were created and operated
as aspects of Petitioners. It would be no more logical to characterize
the senior health centers as separately certified providers than it would
be to characterize the various departments of a hospital as separately
HCFA would not have been able to certify the senior health
centers as Medicare participants if they had applied for certification
as freestanding providers or suppliers of care. And, consequently, HCFA
would not have been able to deem the senior health centers to be providers
based on their JCAHO accreditation. The Social Security Act (Act) and
regulations which govern participation in Medicare do not recognize an
entity known as a "senior health center"which is eligible for certification
as a provider. There are no certification criteria in the regulations
for an entity known as a "senior health center." A "senior health center"is
neither a "provider"nor a "supplier"of services that HCFA may certify
to participate in Medicare. See 42 C.F.R. § 488.1.
Medicare may reimburse for the services that are provided
by senior health centers if HCFA determines that those services are being
provided as an aspect of reimbursable hospital services. As Petitioners
observe, senior health centers may be characterized as departments of
hospitals to the extent that they provide services that are reimbursable
services and to the extent that they are determined
to be parts of hospitals. Petitioners point out also that a new regulation
to be codified at 42 C.F.R. § 413.65 defines "department of a provider"
65 Fed. Reg. 18,434, 18,538 (2000) (to be codified at
42 C.F.R. § 413.65) (emphasis added). While this regulation is new and
has not gone into effect yet, it appears to embody previous HCFA policy
which is not new.
Thus, HCFA's determinations in these cases were determinations
to classify the senior health centers as operating divisions of Petitioners
for purposes of establishing the Medicare reimbursement status of the
items or services that were provided by the senior health centers. HCFA
never determined that any of the senior health centers met certification
requirements as freestanding providers of care. The issue in this case,
therefore, is not whether the senior health centers in question met Medicare
participation requirements as freestanding providers. Nor is it whether
the senior health centers should have been deemed to have met participation
criteria for hospitals or for other providers based on their JCAHO accreditation.
Rather, the issue is the dates on which these centers met HCFA's criteria
for inclusion of centers into Petitioners as provider based facilities.
HCFA recognizes that a provider may own and operate a
facility that is part of the provider even though that facility is not
physically located at the same site as is the provider's principal facility.
63 Fed. Reg. 47,552, 47,587 (1998). Classification of an outpatient facility
as being provider based may be an important concern for the provider which
operates the facility because the classification may affect the manner
in which Medicare reimbursement is paid for the outpatient facility's
services. At times, classification of an outpatient facility as a provider
based facility may mean that the Medicare program will pay more for the
services that are provided by the facility than if the facility is treated
as a freestanding provider. Johns Hopkins Health Systems, DAB CR598
at 4 (1999).
The Act does not contain criteria for determining when
a facility may be classified as a provider based facility. At various
times over the years HCFA has published criteria to be used in determining
whether a facility may be classified as a provider based facility. Prior
to August 1, 1996, these criteria were stated in two provisions of the
Medicare Regional Office Manual (ROM) at ROM §§ 6855 and 6860 and in the
HCFA State Operations Manual (SOM) at SOM § 2024. Effective August, 1,
1996, HCFA restated its criteria in a Program Memorandum for Intermediaries,
PM A-96-7 contains a sentence which states that: "[t]his
PM may be discarded after JULY 31, 1997." (Emphasis in
original). This language suggests that the criteria contained in PM A-96-7
might not be operative after July 31, 1997. However, on September 8, 1998,
HCFA published proposed regulations in the Federal Register which set
forth proposed regulatory criteria for determining when a facility may
be classified as provider based. In that document, HCFA stated that it
would continue to apply the principles stated in PM A-96-7 until 30 days
after a final regulation is published. 63 Fed. Reg. 47,552, 47,588 - 47,589.
On April 7, 2000, the Secretary published a final regulation
establishing criteria for determining whether a facility is provider based.
65 Fed. Reg. 18,434, 18,538 - 18,541. The new regulation is to be codified
at 42 C.F.R. § 413.65 and will become effective on October 10, 2000. I
conclude that, at this time, the applicable criteria which govern when
a facility will be considered to be part of a provider for Medicare reimbursement
purposes are those stated in PM A-96-7.
The criteria stated in PM A-96-7 and in other policy statements
operate as rules of evidence to be utilized in determining whether a facility
is integrated into the operations of a provider so that the items or services
that are provided by that facility may be treated as having been provided
by the provider itself. In all cases, the deciding factor in determining
provider based status is the degree of integration of the allegedly provider
based facility into the provider which is claiming provider based status
for the facility.
The principal criteria for determining provider based
status of an entity set forth in PM A-96-7 include the following:
P.-00-038 Ex. 6 at 2 - 3 ( I have deleted citing subordinate
evidentiary criteria listed under the main criteria 4 - 6 and 8).
As a matter of policy, HCFA has not required that a facility
meet each one of these criteria in order to establish provider based status.
In Johns Hopkins Health Systems, DAB No. 1712 (1999), an appellate
panel of the Departmental Appeals Board stated:
Id. at 5. The Board's appellate panel concluded
that HCFA had never required that a facility meet each and every criterion
in order to satisfy the overall test for provider based status.
PM A-96-7 and earlier policy statements require that the
weight of the evidence proves that a facility is closely integrated into
the operations of a provider. Essentially, HCFA's policies have required
that a facility be operated as a department of, or a wholly integrated
aspect of, a provider in order for that facility to be found to be provider
The new regulation to be codified at 42 C.F.R. § 413.65
in some respects constitutes a change in HCFA's policy. Under the new
regulation, at 42 C.F.R. § 413.65(d), a facility will have to meet all
of the regulation's criteria for provider based status in order to qualify
as a provider based facility. However, the regulation does not contain
all of the criteria for determining provider based status as are stated
in PM A-96-7. For example, the regulation no longer defines accreditation
by JCAHO or by another accrediting body to be relevant evidence of integration.
In any event, the proposed regulation may not be used
as a basis for determining the provider based status of the senior health
centers. The regulation does not go into effect until October 10, 2000.
HCFA hinged its determinations of provider based status
in these cases on the single criterion of JCAHO accreditation, notwithstanding
that HCFA's policy did not require a facility to meet each and every criterion
for provider based status in order to qualify as provider based. Thus,
HCFA determined incorrectly not to certify the senior health centers as
provider based effective with their opening dates solely because it concluded
that these facilities were not JCAHO accredited as of their opening dates.
HCFA's reliance on JCAHO accreditation as a prerequisite
for establishing provider based status is made apparent from the letter
it sent to Petitioners notifying them of its initial determinations as
to the provider based status of the senior health centers. In the initial
determination letter HCFA stated that:
P.-00-038 Ex. 1 at 1; P.-00-075 Ex. 4 at 1 (emphasis added).
HCFA erred in relying on JCHAO accreditation as a necessary
prerequisite for establishing provider based status. Its reliance on JCAHO
accreditation as a necessary prerequisite for establishing provider based
status finds no support in the policies that HCFA published as criteria
for determining provider based status.
As I discuss above, at Finding 2, JCAHO accreditation
is only one of several criteria that HCFA may consider in determining
whether a facility should be accorded provider based status. JCAHO accreditation
of a facility as part of another provider was, under the policy that HCFA
has utilized up until now, an indicator that the facility is integrated
into the operations of that provider. But, it is not the only criterion
on which a determination of integration may be made. Nor is JCAHO accreditation
a necessary prerequisite for establishing provider based status. Indeed,
the regulation to be codified at 42 C.F.R. § 413.65 does not provide that
accreditation is a relevant factor in determining provider based status.
Moreover, PM A-96-7 plainly did not require that a facility
be accredited as a prerequisite to being determined to be provider based.
PM A-96-7 only considered accreditation to be relevant to the extent that
the parent provider was an accredited facility. Under PM A-96-7, if a
provider were not accredited to begin with, then extension of accreditation
to the subordinate facility would not be a factor in determining whether
the facility is provider based.
In their initial applications for provider based status
for the senior health centers, Petitioners submitted to HCFA letters in
which they explained in detail why these centers should be determined
to be provider based. HCFA-00-038 Ex. 3; HCFA-00-075 Ex. 6. The
information that Petitioners included in their letters establishes that,
with the possible exception of JCAHO accreditation, the senior health
facilities met each and every one of HCFA's criteria, as were stated in
PM A-96-7 and in other HCFA policy statements as of their opening dates.
HCFA has not disputed the truth of the contents of the letters. Nor has HCFA argued that the conclusions stated in the letters that the facilities met each and every one of HCFA's criteria for establishing provider based status as of their opening dates - except for JCAHO accreditation - are untrue or are inaccurately stated. In the absence of any disagreement from HCFA, I conclude that the senior health centers met all of HCFA's criteria for provider based status, except for JCAHO accreditation, as of the dates that the senior health centers were opened. The unchallenged conclusion that all of the criteria, except for JCAHO accreditation, were met provides sufficient support for finding that the senior health centers were provider based as of their opening dates. The absence of JCAHO accreditation alone is not sufficient to derogate from my conclusion that HCFA ought to have certified the senior health centers as provider based facilities as of their opening dates.
Steven T. Kessel
Administrative Law Judge