SUBJECT:

Pine Crest Community Mental Health Center, Inc.,

Petitioner,

Centers for Medicare & Medicaid Services

DECISION

I enter summary disposition affirming the determination of the Centers for Medicare & Medicaid Services (CMS)⁽¹⁾ not to certify Petitioner, Pine Crest Community Mental Health Center, Inc., to participate in the Medicare program as a community mental health center (CMHC) providing partial hospitalization services. Summary judgment is appropriate as there are no genuine issues of material fact in dispute and the controlling issues may be resolved as a matter of law. My decision is based on Petitioner's failure to meet the criteria for certification as a CMHC providing partial hospitalization services under federal law and applicable Florida State law.

I. INTRODUCTION

CMS moved for summary disposition and Petitioner opposed that motion. The material facts in this case are not in dispute and thus the case is appropriate for summary judgment. CMS submitted a brief and exhibits (CMS Exs.) 1 through 11. Petitioner submitted a brief and exhibits (P. Exs.) 1 through 7 for my consideration. Petitioner also attached documents marked exhibits 1 through 11 to its February 17, 1999 Request for Hearing. The exhibits submitted by Petitioner as part of the Request for Hearing will be referred to as RFH Exs. 1 through 11 to avoid confusion.⁽²⁾ CMS submitted a reply brief. All exhibits are admitted and made part of the record of proceedings in this case.

Petitioner is located in Pembroke Pines, Florida. P. Exs. 3-4. In November 1997, Petitioner applied to participate in the Medicare program as a CMHC. P. Ex. 2. CMS denied the application in an initial determination dated September 11, 1998 (RFH Ex. 1), and again after reconsideration on December 16, 1998. RFH Ex. 2. CMS specified three grounds for denying the application: (1) Petitioner did not provide required outpatient services; (2) Petitioner did not provide 24-hour emergency care services; and (3) Petitioner did not provide screening for patients being considered for admission to State mental health facilities. Petitioner filed a request for hearing on February 17, 1999 alleging: (1) that it met statutory and regulatory requirements either directly or indirectly through a contract with a hospital; and (2) that CMS acted contrary to law and regulation and in an arbitrary and capricious manner by denying Petitioner's application for provider status.⁽³⁾

Petitioner requested a hearing and the case was assigned to Administrative Law Judge Jill S. Clifton for a hearing and a decision. The case was subsequently transferred to Chief Administrative Law Judge Marion T. Silva, and then to me on October 11, 2001.

My review of all the pleadings and exhibits filed reveals no dispute as to the following additional facts: (1) Petitioner began providing mental health services on October 16, 1997 (Petitioner's hearing request ); (2) Petitioner executed a "Service Agreement" with Hollywood Pavilion Hospital (Hollywood Pavilion) of Hollywood, Florida, on October 3, 1997 and that agreement was renewed on October 1, 1998 (P. Exs. 3, 4); (3) Petitioner produced a 24-hour emergency care policy pursuant to which emergency calls were to be received by an answering service between the hours of 4:00 p.m. to 8:00 a.m., staff would be assigned to remain with the emergency patient up to 23 hours if necessary, and, if the patient was "no longer able to remain in the community," the Petitioner's Medical Director could order admission to Hollywood Pavilion (RFH Ex. 5); and (4) Petitioner engaged All-Communication Systems, Inc. to provide after-hours answering services effective October 1, 1997, but switched to the Communications Service Center to provide answering service on April 27, 1998. RFH Exs. 8, 9.

II. GOVERNING LAW

A. Federal law

"Partial hospitalization services" are services that are reimbursed by the Medicare program pursuant to section 1861(ff) of the Social Security Act (Act) (as amended) (42 U.S.C. § 1395x). "Partial hospitalization services" consist of services that are prescribed by a physician and provided pursuant to specified statutory criteria, and which include: individual and group therapy with physicians or psychologists; occupational therapy requiring the skills of a qualified occupational therapist; services of social workers, trained psychiatric nurses, and other staff trained to work with psychiatric patients; drugs and biologicals furnished for therapeutic purposes; individualized activity therapies; family counseling; patient training and education; diagnostic services; and such other items and services as the Secretary of Health and Human Services may determine to be reasonable and necessary. Act, sections 1861(ff)(1); 1861(ff)(2)(A) - (I).

The Medicare program will reimburse for partial hospitalization services that are provided by either a certified hospital or by a CMHC. Act, section 1861(ff)(3)(A). A "community mental health center" is defined by the Act to be an entity that:

(i)(I) provides the mental health services described in section 1913(c)(1) of the Public Health Service Act; or

(II) in the case of an entity operating in a State that by law precludes the entity from providing itself the service described in subparagraph (E) of such section, provides for such service by contract with an approved organization or entity (as determined by the Secretary)⁽⁴⁾;

(ii) meets applicable licensing or certification requirements for community mental health centers in the State in which it is located; and

(iii) meets such additional conditions as the Secretary shall specify to ensure (I) the health and safety of individuals being furnished such services, (II) the effective and efficient furnishing of such services, and (III) the compliance of such entity with the criteria described in section 1931(c)(1) of the Public Health Service Act.

Act, section 1861(ff)(3)(B)(footnote omitted). Pursuant to section 1913(c)(1) of the Public Health Service Act (currently codified at 42 U.S.C. § 300x-2(c)(1)), the services that a CMHC must provide include the following:

(A) services principally to individuals residing in a defined geographic area (hereafter in this subsection referred to as a "service area");

(B) outpatient services, including specialized outpatient services for children, the elderly, individuals with a serious mental illness, and residents of the . . . [CMHC's] service area who have been discharged from inpatient treatment at a mental health facility;

(C) 24-hour-a-day emergency care services;

(D) day treatment or other partial hospitalization services, or psychosocial rehabilitation services; and

(E) screening for patients being considered for admission to State mental health facilities to determine the appropriateness of such admission.

Additionally, the Secretary of this Department has issued a regulation which defines the term "community mental health center." A CMHC is defined by the regulation to be an entity that:

(1) Provides outpatient services, including specialized outpatient services for children, the elderly, individuals who are chronically mentally ill, and residents of its mental health service area who have been discharged from inpatient treatment at a mental health facility;

(2) Provides 24-hour-a-day emergency care services;

(3) Provides day treatment or other partial hospitalization services, or psychosocial rehabilitation services;

(4) Provides screening for patients being considered for admission to State mental health facilities to determine the appropriateness of such admission;

(5) Provides consultation and education services; and

(6) Meets applicable licensing or certification requirements for CMHCs in the State in which it is located.

42 C.F.R. § 410.2 (1998).

CMS published policy guidelines on July 24, 1995, that describe a CMHC's obligations under section 1913(c)(1) of the Public Health Service Act and expressly allowed for contracting for services to meet the requirements of section 1913(c)(1), with a provision similar to that now codified at section 1861(ff)(3)(B)(i)(II) of the Act. In the "All States Letter 76-95" (All States Letter), CMS stated that a CMHC must provide all of the services that are listed in the Public Health Service Act, either directly or under arrangements with others. CMS Ex. 2; P. Ex. 1.⁽⁵⁾ The phrase "under arrangements" is defined in the All States Letter to mean that a CMHC may arrange for those services described at section 1913(c)(1) of the Public Health Service Act and partial hospitalization services:

under a written arrangement, agreement or contract with other agencies, organizations, or individuals who are not CMHC [community mental health center] employees, and for which the CMHC maintains overall management responsibility. The written agreement includes at least the identification of the services to be provided and the manner in which the contracted services are coordinated, supervised, and evaluated by the CMHC . . . .

CMS Ex. 2 at 3; P. Ex. 1 at 3.

Congress, in section 1861(ff)(3)(B)(ii) of the Act, incorporates State law requirements for CMHCs by specifying that any CMHC under the federal statute must meet licensing and certification requirements of the State. CMS logically relies upon the appropriate State law in order to determine what constitutes adequate screening for patients being considered for admission to State mental health facilities pursuant to section 1913(c)(1)(E) of the Public Health Service Act.

B. Florida State law

Under Florida State law, i.e., the Florida Mental Health Act, Fla. Stat. Ann. § 394.451, et. seq., the Florida Department of Children and Families (DCF) is the "'Mental Health Authority' of Florida." Fla. Stat. Ann. § 394.457. DCF designates which facilities in the State are authorized to receive and treat the mentally ill. Fla. Stat. Ann. § 394.461. The statute provides that "[a] civil patient shall not be admitted to a State treatment facility without previously undergoing a transfer evaluation." Fla. Stat. Ann. § 394.461(2). Florida State law defines a "transfer evaluation" as:

the process . . ., whereby a person who is being considered for placement in a state treatment facility is first evaluated for appropriateness of admission to the facility by a community-based public receiving facility or by a community mental health center or clinic if the public receiving facility is not a community mental health center or clinic.

Fla. Stat. Ann. § 394.455(29).

A "public facility" is one that has contracted with DCF to provide mental health services for persons regardless of their ability to pay and receives State funds to provide the services. Fla. Stat. Ann. § 394.455(25). A "receiving facility" is any public or private facility designated by DCF to receive and hold involuntary mental health patients in emergencies, for psychiatric evaluation or to provide short-term treatment. Fla. Stat. Ann. § 394.455(26). Thus, a "public receiving facility," referred to in Fla. Stat. Ann. § 394.455(29), is a facility that has contracted with DCF to treat patients without regard for their ability to pay, receives State funding, and is designated to receive and hold involuntary patients for purposes provided by the statute. Under Florida State law, a "community mental heath center or clinic" is a "publicly-funded, not-for-profit center" that contracts with DCF to provide inpatient, outpatient, day treatment, or emergency services. Fla. Stat. Ann. § 394.455(6).

III. Issues, findings of fact, conclusions of law, and analysis

The issue in this case is:

Whether CMS properly denied Petitioner's request to be certified as a CMHC so that Petitioner could receive reimbursement under Medicare for providing partial hospitalization services.

The CMS denial was proper in this case for two independently sufficient reasons as discussed in the following findings of fact and conclusions of law, which are set out as separately numbered headings and discussed in detail.

1. Petitioner is a for-profit entity and, consequently, does not qualify as a CMHC under Florida law. Therefore, the requirement of § 1861(ff)(3)(B)(ii) of the Act is not satisfied and Petitioner is not, as a matter of law, a CMHC for purposes of Medicare reimbursement.

Petitioner notes in its brief that "the State of Florida has no licensing and/or certification requirements" for CMHCs. P. Brief at 2. Petitioner argues that CMS has apparently conceded the issue of whether or not Petitioner satisfies the requirement of section 1861(ff)(3)(B)(ii) of the Act. Of course, whether CMS intended to concede on this point or merely omitted to address it is of no consequence as this is a controlling point of law not subject to waiver by CMS. Further, any such concession by CMS is not binding upon me, particularly not to the extent it violates the Act. Thus, it is both necessary and appropriate to further analyze the application of section 1861(ff)(3)(B)(ii) in this case.

Under section 1861(ff)(3)(A) of the Act, a CMHC may receive Medicare reimbursement for mental health services it provides to eligible patients. As discussed above, section 1861(ff)(3)(B) of the Act sets forth three requirements that a provider must meet to be certified eligible to receive Medicare reimbursement as a CMHC: (1) the provider must, directly or indirectly through contracting, provide services specified in section 1913(c)(1) of the Public Health Service Act; (2) the provider must meet the applicable licensing or certification requirements for CMHCs in the State where located; and (3) the provider must meet additional requirements imposed by the Secretary.

Petitioner finds no specific licensing or certification procedures for CMHCs under Florida law and concludes, in essence, that the second requirement of section 1861(ff)(3)(B) of the Act simply has no application in this case. Petitioner's approach does violence to most of the basic rules of regulatory construction. Petitioner's approach gives rise to the question of why Congress inserted the second requirement of section 1861(ff)(3)(B) if it has no application in a potentially significant number of cases. My duty is to apply the statute as Congress intended and my tools to accomplish this task are the generally-accepted rules of statutory and regulatory construction. Thus, I consider the plain language of section 1861(ff)(3)(B)(ii) of the Act, read in the context of section 1861(ff)(3)(B), and read in a manner to give the section meaning. See Florence Peters, DAB No. 1706 (1999); St. Anthony Hospital, DAB No. 1728 (2000). I conclude that the correct interpretation of the section is that a provider must meet the requirements of a CMHC in the State where it is located in order for it to be considered a CMHC under the Act. My interpretation effectuates the apparent Congressional intent that the States retain some control of the operation of CMHCs.

Florida may not, as Petitioner asserts, have specific licensing or certification requirements for CMHCs. However, the Florida legislature has narrowly defined a CMHC to be a "publicly-funded, not-for-profit center" that contracts with DCF to provide inpatient, outpatient, day treatment, or emergency services. Fla. Stat. Ann. § 394.455(6). Petitioner admits in its brief that it is a private, for-profit facility. P. Brief at 5. Petitioner does not have a contract with DCF. Therefore, Petitioner does not meet the statutory definition of a CMHC under Florida law. Accordingly, Petitioner does not satisfy the requirement of section 1861(ff)(3)(B)(ii) of the Act and may not be certified as a CMHC for purposes of reimbursement under Medicare.

2. Petitioner does not satisfy the screening requirements of the Act because: (a) Petitioner is not authorized under Florida State law to provide screening itself for admission to State mental health facilities; and (b) Petitioner has no contract with an authorized entity to accomplish such screening.

a. Petitioner cannot qualify under federal participation requirements by performing screening directly because Petitioner was not authorized under Florida State law to perform transfer evaluations.

In order to be able to perform directly the screening services that are required under section 1861(ff)(3)(A) of the Act and section 1913(c)(1)(E) of the Public Health Service Act, Petitioner must be authorized to perform transfer evaluations pursuant to Florida State law. As stated above, federal law requires a CMHC to comply with applicable State requirements in order to participate in Medicare. 42 C.F.R. § 410.2. Florida State law discusses screening using the term "transfer evaluations." Fla. Stat. Ann. § 394.455(29). Under Florida State law, a transfer evaluation for the purpose of determining whether a patient may be transferred to a State mental health facility may only be performed by a publicly-funded, not-for-profit center which contracts with DCF for the provision of inpatient, outpatient, day treatment, or emergency services. Fla. Stat. Ann. § 394.455(6).

Petitioner admits in its brief that it is a private, for-profit facility. P. Brief at 5. Thus, Petitioner cannot qualify to perform screening directly because it cannot qualify pursuant to Florida State law to perform transfer evaluations.

b. Petitioner's contracts with another entity do not provide for screening within the meaning of federal requirements.

The recent amendment to section 1861(ff)(3)(B)(i) of the Act, which added subsection (II), makes clear that Congress intends that an entity can contract with an authorized provider for the delivery of services that the entity itself cannot otherwise provide under State law. Petitioner argues that it does deliver all services required by section 1861(ff)(3)(B)(i)(I) of the Act either directly or through contracts with third parties. In fact, it is undisputed that Petitioner has a contract with a telephone answering service to satisfy the requirement for 24-hour emergency care access for patients (RFH Exs. 8, 9).⁽⁶⁾ It is also undisputed that Petitioner has a contract with Hollywood Pavilion Hospital (P. Exs. 3, 4).

Petitioner argues that, through its contract with Hollywood Pavilion, it satisfies the statutory requirements for Medicare certification by providing services "under arrangements" pursuant to its contract with the hospital. Petitioner asserts that, through its contract with Hollywood Pavilion, which it characterizes as a "designated DCF private receiving facility," it provides the requisite "transfer evaluations" in a way which satisfies federal participation criteria. See Request for Hearing at 14; P. Brief at 3 - 8.

Petitioner argues that, under Florida State law, an entity known as a "receiving facility" is permitted to perform transfer evaluations. According to Petitioner:

[w]ith respect to involuntary admissions, Florida law does not preclude a for-profit CMHC from having an individual taken involuntarily to a Receiving Facility, where the individual receives a transfer evaluation that will result in admission or nonadmission to a State mental health facility.

P. Brief at 5. Petitioner's argument, evidently, is that Hollywood Pavilion can perform a lawful transfer evaluation and Petitioner can involuntarily send a patient to Hollywood Pavilion for such an evaluation and eventual transfer to a State mental health facility.

Assuming arguendo, that Petitioner's assertion is correct that Hollywood Pavilion can accomplish a lawful transfer evaluation, Petitioner's argument is flawed and must fail for two reasons.

First, the two contracts⁽⁷⁾ submitted by Petitioner make no specific reference to "transfer evaluations" or patient screening for admission to State mental health facilities. The contracts say nothing on the subject of whether Hollywood Pavilion would perform screening or transfer evaluations on behalf of Petitioner. Petitioner has also acknowledged the existence of the All States Letter, which was issued before either contract with Hollywood Pavilion was executed. The All States Letter made clear as early as July 1995 that if a CMHC provides screening services through arrangements with others (e.g., a contract with another entity), the CMHC must assume overall management responsibility over the services provided by the other entity. CMS Ex. 2 at 3. Moreover, the All States Letter provides that a written agreement for the provision of services "under arrangements" must include "at least the identification of the services to be provided and the manner in which the contracted services are coordinated, supervised, and evaluated by the CMHC." Id. I have examined the contracts and conclude that neither contract with Hollywood Pavilion discusses any management or supervisory role by Petitioner with respect to the services provided by Hollywood Pavilion.

Second, the language of the 1998 contract makes more clear than even the 1997 contract that when Petitioner sends a patient to Hollywood Pavilion, Petitioner does not retain overall management authority, but loses control over the patient and his or her treatment. The contract states specifically that Petitioner "reserves the right to follow up on the patient's ongoing progress and outcome with the written authorization of the patient." P. Ex. 4 (emphasis added). If Petitioner maintained a lawful provider/patient relationship with the patient after the patient's admission to Hollywood Pavilion and the ability to exercise any control of the patient's care, why would Petitioner need written consent from the patient to follow-up? The contract further provides that Petitioner's Medical Director,⁽⁸⁾ who must meet the "credentialing and privileging requirements" of Hollywood Pavilion, accomplishes the admission to Hollywood subject to the policies of "the facility." If transfer to another facility is subsequently required, the "Medical Director" arranges the transfer. A fair reading of the plain language of the contract is that the Medical Director, who has privileges at Hollywood Pavilion, is making the transfer arrangements on behalf of Hollywood Pavilion where the patient has been admitted subject to the policies of Hollywood Pavilion. The contractual language simply does not support a reading that a subsequent transfer from Hollywood Pavilion is on behalf of, at the behest of, or subject to the control of Petitioner.

Ms. Josephine Hunte, who apparently signed the October 1998 contract with Hollywood Pavilion, acknowledges in her declaration that the Hollywood Pavilion contracts "do not specifically state that the screening services and other core services would be provided thereunder." P. Ex. 2 at 2 - 3. Ms. Hunte asserts, though, that the specific intent of the parties was that Hollywood Pavilion would perform screenings for transfer of patients to State mental facilities. Id. at 3. Although the contract should speak for itself, I will accept Ms. Hunte's assertion as true for purposes of this decision. Assuming for purposes of this motion, as I have, that Hollywood Pavilion has the authority under Florida law to do transfer evaluations and transfer patients to a State mental health facility, I have no doubt that Hollywood does such evaluations when a transfer is deemed necessary. I conclude, however, that any transfer evaluation is at the discretion of Hollywood Pavilion, and not on behalf of or subject to the direction or control of Petitioner since, to find out anything about a patient's progress and outcome, Petitioner has agreed it needs the written consent of the patient. I cannot find, based upon Ms. Hunte's assertion or the plain language of the contract, that once Petitioner sends a patient to Hollywood Pavilion, that Petitioner continues to maintain any management and control over the disposition of the patient. None of the contracts between Petitioner and Hollywood Pavilion vests overall management responsibility for contracted services - much less overall management responsibility over the screening process - with Petitioner.

3. My limited jurisdiction prevents my ruling that alleged delay by CMS or representations by CMS employees estop CMS from denying Petitioner's certification as a CMHC for purposes of Medicare reimbursement, as estoppel will not lie against the United States.

Petitioner implies, through Ms. Hunte's declaration, that CMS representatives either overtly or implicitly indicated that Petitioner would be approved for Medicare participation. P. Ex. 2. Petitioner notes that it filed its application with CMS in early November 1997, and that the lengthy delay in processing its application is worthy of some consideration. Petitioner also contends that it relied upon the guidance contained in the All States Letter, believing it would ultimately be approved for participation. See Request for Hearing; P. Brief at 2 - 3, 11 - 12.

My jurisdiction in cases involving CMS is limited to hearing and deciding those issues which the Secretary has delegated authority for me to hear and decide, as set forth at 42 C.F.R. §§ 498.3 and 498.5. The regulations authorize me only to hear and decide cases involving specified initial determinations by CMS. I have no authority to award damages or fashion extraordinary relief. Nor do I have the authority to hear and decide claims of estoppel against the Secretary. However, I refer the parties to the decisions of the United States Supreme Court in Office of Personnel Management v. Richmond, 496 U.S. 414, 110 S.Ct. 2465, 110 L.Ed.2d 387 (1990) and Heckler v. Community Health Services of Crawford County, Inc., 467 U.S. 51, 104 S.Ct. 2218, 81 L.Ed.2d 42, 5 Soc.Sec.Rep.Ser. 29 (1984). While the Supreme Court has not ruled that estoppel will never lie against the government, the decisions in OPM v. Richmond and Heckler v. Community Health Services, make clear that estoppel will not lie against the government in cases involving benefits to be paid from the Treasury, particularly in the complicated area of Medicare.

Petitioner raises additional arguments regarding CMS' reliance upon an August 21, 1998 policy memorandum issued by CMS, arguing it was not promulgated in accordance with the Administrative Procedure Act, constituted a retroactive modification of the regulations, and amounted to an abuse of discretion by CMS. These arguments merit no discussion except to note that reference to the August 21, 1998 memorandum is unnecessary for the interpretation or application of the statutes and regulations in this case.

IV. CONCLUSION

For the foregoing reasons, summary judgment is entered affirming CMS' determination not to certify Petitioner to participate in the Medicare program as a CMHC providing partial hospitalization services.

Keith W. Sickendick

Administrative Law Judge

1. Effective July 5, 2001, the Health Care Financing Administration (HCFA) was renamed the Centers for Medicare & Medicaid Services (CMS). 66 Fed Reg. 35,437 (2001).

2. ² The better procedure would have been for Petitioner to mark the exhibits attached to its Reply to Respondent's Motion for Summary Disposition (P. Brief) as P. Exs. 12 - 18 rather than restarting its exhibit numbering with the number 1.

3. ³ Petitioner alleges several additional issues in its brief, all of which are simply variations of the two general issues it set forth in its hearing request.

4. ⁴ Section 1861(ff)(3)(B)(i)(II) was added by the Medicare, Medicaid, and State Children's Health Insurance Program Benefits Improvement and Protection Act of 2000 (BIPA), Pub. L. No. 106-554 (2001) .

5. ⁵ The All States Letter refers to section 1916(c) of the Public Health Service Act which was recodified as section 1913(c) of the Public Health Service Act after the All States Letter was issued.

6. Whether or not Petitioner is now providing or ever has provided services under its contracts is irrelevant to my analysis, for even assuming such services have been provided, Petitioner does not meet the statutory requirements for certification.

7. The contract between Petitioner and Hollywood Pavilion is a one-year, renewable contract, terminable by either party by written notice or by mutual consent. Petitioner has submitted the contracts for 1997 and 1998. P. Exs. 3, 4.

8. The contract does not make clear whether reference is being made to the Medical Director of Petitioner or that of Hollywood Pavilion. It is assumed for purposes of this decision that the reference is to the Medical Director of Petitioner.