Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
The Cleveland Clinic Foundation
Centers for Medicare & Medicaid Services.
Docket No. C-18-1304
Decision No. 5903
When someone is tested for a sleep disorder, testing may need to take place while a person is sleeping or trying to sleep. The Cleveland Clinic Foundation (Petitioner), along with various other institutions, decided that it might be useful to conduct such tests in hotel rooms, i.e., an environment where people would normally sleep, as opposed to the less comfortable surroundings of a hospital room. To accomplish this, Petitioner leased hotel rooms at various hotels in Ohio relatively near to Petitioner's primary hospital facility. One such location is the Cleveland Clinic Sleep Disorders Center at the Courtyard Marriott in Independence, Ohio (Sleep Disorders Center). Petitioner leased a block of rooms in one of the corridors of the fifth floor of the hotel. One room is used as the control room for Petitioner's staff. The other rooms are the places where patients are connected to various electrodes to collect data while the patients sleep or try to sleep.
This case is not about the efficacy of the tests that Petitioner performs. This case is about the status, for Medicare payment purposes, of the Sleep Disorders Center. If the Sleep Disorders Center is a "department" of Petitioner's hospital and meets the various Medicare requirements for hospitals, then Petitioner will receive increased
reimbursement from Medicare because the tests will be considered to have been provided by a hospital. If not, then Petitioner will receive reduced reimbursement.
The Centers for Medicare & Medicaid Services (CMS) originally did not find any reason to deny Petitioner's request that the Sleep Disorder Center receive provider-based status, i.e., that it be considered part of Petitioner's hospital even though it was not physically connected to it. But several months later, CMS reversed itself and denied such status. Petitioner requested reconsideration, and CMS later issued a reconsidered determination denying provider-based status. After Petitioner requested a hearing before an administrative law judge (ALJ), CMS agreed to reopen the matter and Petitioner withdrew its hearing request. CMS's revised reconsidered determination also denied provider-based status. Petitioner again sought ALJ review, which is the present case.
CMS's factual and legal reasons for the denials have changed during this process, most recently in the proceedings before me. This final basis for denial, revealed in briefs, claims that the Sleep Disorder Center is deficient in meeting fire safety standards, even though the Sleep Disorders Center is located in a hotel that is state licensed and has met state fire code requirements. CMS also says, as it has since the revised initial determination, that the Sleep Disorders Center does not meet the regulatory definition of a "department of a provider," although to prove this, CMS requests that I interpret this definition to include multiple requirements that are not stated in the definition.
At its core, CMS is concerned that the Sleep Disorders Center, as originally constituted, did not have a physical barrier between the hotel and hotel guests and the block of rooms that it leased. Petitioner later erected a wall with a door but has maintained this appeal from the denial of the Sleep Disorders Center's original configuration. It is unfortunate that the parties could not reached an accommodation by this point. Not having done so, I render a decision. I conclude that neither the regulations nor CMS's interpretative guidance restricts provider-based status in this case. Therefore, I reverse CMS.
I. Legal Framework
The Medicare program "provides basic protection against the costs of hospital . . . care" for individuals over the age of 65 who are eligible for Social Security retirement benefits and for individuals under 65 who meet other criteria. 42 U.S.C. § 1395c. Medicare does this by making payments on behalf of beneficiaries for certain in-patient hospital services and other services. 42 U.S.C. § 1395d.
In the Medicare program, a hospital is a "provider of services." 42 U.S.C. § 1395x(u). As such, each hospital seeking to participate in the Medicare program must file a provider agreement with the Secretary of Health and Human Services (Secretary) that meets certain statutory requirements. 42 U.S.C. § 1395cc(a).
In addition to the terms in the provider agreement, the Social Security Act (Act) establishes various requirements for hospitals, including one to meet "such other requirements as the Secretary finds necessary in the interest of the health and safety of individuals who are furnished services in the institution." 42 U.S.C. § 1395x(e)(9). To effectuate the Act's requirements, the Secretary promulgated regulations establishing Medicare conditions of participation for hospitals. Each condition is composed of standards. The conditions and the standards reflect both the Act's requirements as well as those imposed by the Secretary. See 42 C.F.R. pt. 482.
The Medicare program recognizes, for payment purposes, that a provider may own or operate another type of facility, such as an outpatient clinic, that is either located in the provider's main building or on its campus, or which is at an entirely different location. Shady Grove Adventist Hosp., DAB No. 2221 at 3 (2008). The Secretary refers to this as a "provider-based entity," which the Secretary has defined as:
a provider of health care services . . . that is either created by, or acquired by, a main provider for the purpose of furnishing health care services of a different type from those of the main provider under the ownership and administrative and financial control of the main provider, in accordance with the provisions of this section. A provider-based entity comprises both the specific physical facility that serves as the site of services of a type for which payment could be claimed under the Medicare or Medicaid program, and the personnel and equipment needed to deliver the services at that facility. A provider-based entity may, by itself, be qualified to participate in Medicare as a provider under [42 C.F.R.] § 489.2 . . . and the Medicare conditions of participation do apply to a provider-based entity as an independent entity.
42 C.F.R. § 413.65(a)(2). When a provider has a provider-based entity, it is often the case that "the ‘main provider' . . . and subordinate facility share overhead costs and use of revenue-producing assets." Shady Grove, DAB No. 2221 at 3. If "the relationship between a main provider and a provider-based entity or a department of a provider, remote location of a hospital, or satellite facility" complies with the Secretary's regulations, then Medicare will recognize "provider-based status." 42 C.F.R. § 413.65(a)(2). This is significant because:
Recognition of the subordinate facility as provider-based enables the main provider to obtain Medicare outpatient [prospective payment system (OPPS)] payments for services provided in the subordinate facility. In some instances, a determination that a facility is provider-based results in
Medicare payments for covered services that exceed what Medicare would pay for those services if the facility were not classified as provider-based. Designating a facility as provider-based may also serve to increase the coinsurance liability of Medicare beneficiaries who receive covered services in that facility.
Shady Grove, DAB No. 2221 at 3.
A provider may seek a determination concerning provider-based status by submitting an attestation that it will comply with various requirements in the regulations. If the potential main provider is a hospital, that hospital is also required to attest that it will fulfill the obligations of hospital outpatient departments and hospital-based entities described in 42 C.F.R. § 413.65(g). The provider must maintain the documentation that supports the attestation and must make that documentation available to CMS or a CMS contractor upon request. CMS will review and determine the completeness of each attestation and will determine whether a facility or organization is provider-based. 42 C.F.R. § 413.65(b).
CMS's determination as to whether "a prospective department of a provider, remote location of a hospital, satellite facility, or provider-based entity qualifies for provider –based status under § 413.65" is an initial determination that is subject to appeal. 42 C.F.R. § 498.3(b)(2).
II. Background and Procedural History
Petitioner, a hospital with a leading national reputation, was incorporated in 1921 as a not-for-profit corporation. P. Ex. 1 at 2; P Ex. 18 at 59-68. Petitioner is also a provider of services in the Medicare program.
Petitioner filed with a CMS contractor a "Provider Based Attestation Statement" seeking provider-based status for Petitioner's Sleep Disorders Center located at a Marriott Courtyard, 5051 West Creek Road, Suite 501, Independence, Ohio 44131. P. Ex. 1. Petitioner's Administrator and Chief Accounting Officer/Controller (Petitioner's officers) signed the attestation in June and July 2015, respectively. P. Ex. 1 at 13. Petitioner also submitted a variety of documents in support of the attestation. P. Ex. 18.
Petitioner's officers attested that the Sleep Disorders Center is not located on Petitioner's main campus but is located within a 35-mile radius of the main campus. P. Ex. 1 at. 1, 10; see also P. Ex. 18 at 1. They also indicated that the Sleep Disorders Center became provider-based on April 1, 2013. P. Ex. 1 at 1. Petitioner's officers attested that the Sleep Disorders Center is integrated with the main provider, the professional staff have clinical privileges at the main provider, the main provider oversees the sleep center in the
same way that it does for any other department at Petitioner's hospital, the medical records for patients are integrated, and the financial operations between the main provider and sleep center are fully integrated. P. Ex. 1 at 2-4. Finally, Petitioner's officers stated that it treats all patients at the sleep center as outpatients. P. Ex. 1 at 6.
On February 23, 2016, CMS issued an initial determination approving Petitioner's Sleep Disorders Center because it met provider-based criteria at 42 C.F.R. § 413.65. P. Ex. 2.
On July 20, 2016, CMS issued a revised initial determination. CMS stated that Petitioner failed to meet CMS's provider-based criteria and rescinded provider-based status for the Sleep Disorders Center. CMS Ex. 4. Specifically, CMS's revised initial determination stated that the Sleep Disorders Center did not meet the definition of "Department of a provider" in 42 C.F.R. § 413.65(a)(2), and failed to comply with the Medicare provider agreement for hospitals, 42 C.F.R. § 413.65(g)(3), as well as the requirement that patients entering the Sleep Disorders Center know that they are entering space that is considered the same as the main provider. 42 C.F.R. § 413.65(d)(4).
The revised initial determination combined its analysis of the definition of "Department of a provider" and Petitioner's alleged noncompliance with the Medicare provider agreement together. The initial determination stated that CMS did not recognize the sharing of space with a non-healthcare entity, such as hotel. The initial determination compared provisions in the Act for hospitals and other providers and indicated that other providers were expressly permitted to exist as distinct parts of other institutions while no express recognition for hospitals exists. The initial determination also stated that the definition for a "Department of a provider" means that provider-based status includes the specific physical facility that serves as the site of services, the personnel, and equipment needed to provide services. CMS Ex. 4 at 2-3. From this, the initial determination drew the conclusion that:
CMS may consider clearly-defined and separate suite in a medical office building to be a singular component for compliance with the hospital [conditions of participation] and Medicare provider-based status requirements and obligations for the component to be considered part of a hospital. However, CMS cannot consider only portions of a singular component when determining if these criteria are met.
A main provider hospital may not lease or otherwise obtain use of a portion of a singular component and create a smaller component within the space. Certain features, such as shared entryways, interior hallways, bathroom facilities, treatment rooms, waiting rooms, and registration areas are all indications that a purposed hospital space may instead be part
of a larger component. Building plans that do not clearly demarcate a purported hospital department as a distinct space is another possible indicator that the space is not a self-contained component.
CMS Ex. 4 at 3. From this, the initial determination concluded that the entire hotel must be considered when determining compliance with the conditions of participation. Interestingly, the initial determination said that "[f]irst and foremost" the Sleep Disorders Center did not comply with the public awareness requirement, which itself was a separate basis for the denial. The initial determination also stated that the Marriott Courtyard is not owned and operated by Petitioner and not integrated clinically or administratively into Petitioner's hospital. CMS did not cite any legal authority or internal CMS manual guidance for its views and conclusions. CMS Ex. 4 at 3.
The initial determination then discussed the public awareness requirement at 42 C.F.R. § 413.65(d)(4). The initial determination stated the reasons CMS believed that individuals could be confused between the Sleep Disorders Center and the Marriott Courtyard. CMS Ex. 4 at 4.
After receiving three extensions from CMS, on January 19, 2017, Petitioner requested that CMS reconsider the revised initial determination. P. Ex. 14. Petitioner asserted that it met all of the requirements in the definition for a "department of a provider," except for the initial determination's requirement that the entire space where the Sleep Disorders Center is located (i.e., the entire hotel) meet provider-based status requirements. Petitioner pointed out that the initial determination failed to cite any specific language in the Act, regulations, or the State Operations Manual (SOM) to support this conclusion. P. Ex. 14 at 2.
Regarding the alleged failure to comply with the Medicare provider agreement, 42 C.F.R. § 413.65(g), Petitioner asserted that CMS did not articulate a specific condition of participation with which it failed to comply and pointed out that CMS's position was based on CMS's belief about sharing a building with the Marriott Courtyard. Petitioner again noted the lack of citation to legal authority. P. Ex. 14 at 4.
As to the requirement of public awareness, 42 C.F.R. § 413.65(d)(4), Petitioner submitted evidence of the signage that makes the public aware that the Sleep Disorders Center is part of Petitioner's hospital and not the Marriott hotel. P. Ex. 14 at 4.
On May 5, 2017, CMS issued a reconsidered determination upholding the reasons it denied provider-based status in the revised initial determination. However, CMS indicated that it did not reconsider its initial determination because Petitioner did not submit any new documents to support its position. P. Ex. 15 at 3.
Petitioner requested a hearing before an ALJ with the Civil Remedies Division, which was docketed as C-17-851. However, CMS agreed to reopen the reconsidered determination and the case was dismissed. P. Ex. 11 at 2.
On December 22, 2017, Petitioner filed with CMS another document titled "Request for Reconsideration" laying out arguments for a favorable determination. P. Ex. 11; CMS Ex. 2.
On July 9, 2018, CMS issued a revised reconsidered determination denying provider-based status for the Sleep Disorders Center. CMS Ex. 1. This revised reconsidered determination abandoned the previous "[f]irst and foremost" concern that there was insufficient public awareness of the difference between the Sleep Disorders Center and the Marriott hotel under 42 C.F.R. § 413.65(d)(4). CMS conceded that there was sufficient signage inside and outside "showing that [the Sleep Disorders Center] is held out to the public as part of the Main Provider." CMS Ex. 1 at 2.
However, CMS continued to believe that the Sleep Disorders Center did not meet the definition of a department of a provider. CMS also introduced a new basis for denying provider-based status. While maintaining that the Sleep Disorders Center did not comply with the Medicare provider agreement, CMS now said the violation of 42 C.F.R. § 413.65(g)(3) was based on Petitioner's noncompliance with 42 C.F.R. § 413.65(g)(8), which requires compliance with the conditions of participation. CMS then identified a new condition of participation, 42 C.F.R. § 482.41, that the Sleep Disorders Center allegedly violated. CMS Ex. 1 at 2-3.
The revised reconsidered determination stated:
Specifically, 42 C.F.R. § 482.41 requires that the physical environment "be constructed, arranged, and maintained to ensure the safety of the patient, and to provide facilities for diagnosis and treatment and for special hospital services appropriate to the needs of the community." Carving out a space and leasing hotel guest rooms, where hotel guests, staff, and visitors can freely walk through the area where patients are receiving Medicare services, does not satisfy physical environment requirements and potentially jeopardizes the safety, privacy and confidentiality of patients.
CMS Ex. 1 at 3.
Petitioner timely requested a hearing before an ALJ to dispute the revised reconsidered determination. The case was originally assigned to a different ALJ. She issued an Acknowledgment and Pre-Hearing Order (Order) that established a prehearing submission schedule. The case was then transferred to me.
CMS filed its prehearing brief (CMS Br.) and ten exhibits (CMS Exs. 1-10). CMS expressly stated that it expected not to call any witnesses. Petitioner then filed its prehearing brief (P. Br.) along with 18 exhibits (P. Exs. 1-18). Petitioner also submitted declarations, which were not marked as exhibits, for two witnesses named Nancy Foldvary-Schaefer, DO, MS (Foldvary-Schaefer Decl.), and Jeffrey L. Combs (Combs Decl.). Petitioner also stated that it wanted CMS employee Gary M. Pierce to testify about the original initial approval that he issued. Further, Petitioner objected to CMS's argument in its brief that the Sleep Disorders Center was not in compliance with 42 C.F.R. § 482.41 because the Sleep Disorders Center failed to meet life safety code (LSC) (i.e., fire code) requirements under 42 C.F.R. § 482.41(b). Petitioner pointed out that this was yet another new basis to support denial of provider-based status.
CMS objected to Petitioner's proposal for Gary Pierce to testify. CMS also suggested that I render a decision based on the written record since CMS did not request to cross-examine Petitioner's witnesses and CMS had none of its own. CMS also filed a reply brief (CMS Reply).
Petitioner responded to CMS's objection and requested an opportunity to respond to the CMS Reply.
In April 16, 2019 Order, I granted Petitioner's request to file an additional brief. See 42 C.F.R. § 498.17(b)(2). I also addressed the issue Petitioner raised that CMS changed/added to its reasons for denying the Sleep Disorders Center provider-based status. I stated that the revised reconsidered determination added noncompliance with 42 C.F.R. § 413.65(g)(8) as a basis for denial. I noted that CMS was correct that it can expand on the reasons stated in the revised reconsidered determination or cure notice deficiencies during the ALJ hearing process so long as there is sufficient notice to Petitioner. See Access Foot Care, Inc. & Robert Metnick, D.P.M., DAB No. 2752 (2016); Dinesh Patel, M.D., DAB No. 2551 at 8 (2013); Green Hills Enters., LLC, DAB No. 2199 at 8 (2008); see also Union Hosp., Inc., DAB No. 2463 at 8-9 (2012) (upholding an ALJ's decision to permit CMS to add a licensure issue to the grounds for the denial of provider-based status even though the licensure issue was not discussed in the reconsidered determination).
However, because it was essential that Petitioner have sufficient notice and opportunity to respond to CMS's new position, I granted Petitioner's request to submit an additional brief. See 42 C.F.R. § 498.17(b)(2). I also indicated that Petitioner could submit
additional evidence related to matters in the CMS Reply and permitted Petitioner to submit additional written direct testimony for its witnesses or new witnesses.
Regarding Petitioner's proposed adverse witness, Gary Pierce, I sustained CMS's objection because his testimony would not be relevant. I stated that I had to decide this matter de novo, and the reasons why Mr. Pierce initially granted provider-based status are not relevant to me because I had to primarily look to the revised reconsidered determination for CMS's basis for denying provider-based status, as modified by CMS's briefing.
Petitioner timely filed an additional brief (P. Add. Br.); however, Petitioner did not submit additional evidence or written testimony. CMS filed a response to Petitioner's brief (CMS Response).
III. Admission of Evidence
I admit CMS Exs. 1-10 and P. Exs. 1-18 into the record without objection. I also admit the unmarked declarations of Petitioner's witnesses, Jeffrey L. Combs and Nancy Foldvary-Schaefer. DAB Electronic Filing (E-File) Docket Items #15a and #17, respectively. See Standing Prehearing Order ¶ 10; CRDP § 14(e).
IV. Decision on the Written Record
The parties were advised that an in-person hearing would only be necessary if a party submitted the written direct testimony from a proposed witness and the opposing party requested an opportunity to cross-examine the witness. Order ¶¶ 7-9; CRD Procedures §§ 16(b), 19(b); see Vandalia Park, DAB No. 1940 (2004); Pac. Regency Arvin, DAB No. 1823 at 8 (2002) (holding that the use of written direct testimony for witnesses is permissible so long as the opposing party has the opportunity to cross-examine those witnesses). CMS did not offer any written direct testimony. Petitioner submitted declarations from two witnesses and requested to call a witness employed by CMS.
As stated above, I sustained CMS's objection to Petitioner calling the CMS employee as a witness. Further, CMS declined to cross-examine those witnesses for whom Petitioner submitted written direct testimony. CMS. Response at 2. Therefore, there is no need for an in-person hearing and decide this case based on the written record. Order ¶ 11; CRDP § 19(d).
Whether the Sleep Disorders Center meets the requirements for provider-based status.
I have jurisdiction to hear and decide this case. 42 C.F.R. § 498.3(b)(2); see 42 C.F.R. §§ 498.32(b)(1); Union Hosp., Inc., DAB No. 2463 at 2 (2012).
VII. Findings of Fact, Conclusions of Law, and Analysis
1. The Sleep Disorders Center was comprised of a contiguous block of six rooms at the end of a corridor leased from a Marriott Courtyard. The Sleep Disorder Center only engaged in conducting sleep studies of patients, which it did by electronic monitoring of patients while they slept.1
Petitioner's off-site Sleep Disorders Center is located on the 5th floor of the Marriott Courtyard hotel in Independence, Ohio. The Sleep Disorders Center consists of a contiguous block of six rooms at the end of a corridor which Petitioner leased from the Marriott Courtyard. According to Petitioner, these rooms are under its "exclusive use and control." Foldvary-Schaefer Decl. ¶ 2; see CMS Ex. 7 at 5, 12. One of the rooms is designated as a "control room," where patients are checked in by Petitoner's employees and from where technicians monitor patients who are undergoing sleep studies. The other rooms are used to conduct sleep studies. Foldvary-Schaefer Decl. at ¶¶ 3, 5.
According to the treatment guide for Petitioner's sleep labs,
A sleep study or overnight polysomnogram (PSG) is a test that records sleep and the bioelectrical signals coming from your body during sleep. Respiratory (breathing) monitoring during the PSG allows sleep specialists to rule out breathing problems during sleep as the reason for the disrupted sleep and excessive muscle activity.
CMS Ex. 6 at 13. Other studies conducted at the sleep labs include a Positive Airway Pressure (PAP) Titration study, which is an overnight study done after a diagnosis of sleep apnea has been made, and daytime sleep studies. CMS Ex. 6 at 13.
2. The Sleep Disorders Center meets the requirements of both 42 C.F.R. § 413.65(g)(3) and 42 C.F.R. § 413.65(g)(8).
In the July 9, 2018 revised reconsidered determination, CMS denied provider-based status for the Sleep Disorders Center based on alleged noncompliance with three provisions of the regulations: 42 C.F.R. § 413.65(a)(2), (g)(3), and (g)(8). CMS Ex. 1 at 1-3. CMS argues that the Sleep Disorders Center's noncompliance with 42 C.F.R. § 413.65(g)(3) is based upon its noncompliance with 42 C.F.R. § 413.65(g)(8); therefore, I discuss these two regulations together. CMS Ex. 1 at 3.
The regulations at 42 C.F.R. § 413.65(g)(3) and (g)(8) provide:
(g) Obligations of hospital outpatient departments and hospital-based entities. To qualify for provider-based status in relation to a hospital, a facility or organization must comply with the following requirements:
* * *
(3) Hospital outpatient departments must comply with all the terms of the hospital's provider agreement.
* * *
(8) Hospital outpatient departments must meet applicable hospital health and safety rules for Medicare-participating hospitals in part 482 of this chapter.
CMS's revised reconsidered determination found that the Sleep Disorders Center failed to comply with 42 C.F.R. § 483.413(g)(8) because it failed to satisfy the condition of participation at 42 C.F.R. § 482.41 ("Physical environment"), which is incorporated into 42 C.F.R. § 483.413(g)(8). CMS Ex. 1 at 3. However, in the revised reconsidered determination, CMS only generally stated that Petitioner violated the condition of participation at 42 C.F.R. § 482.41 and did not specify the standards violated under the condition. The condition of participation at 42 C.F.R. § 482.41, has general prefatory language that provides the following: "The hospital must be constructed, arranged, and maintained to ensure the safety of the patient, and to provide facilities for diagnosis and treatment and for special hospital services appropriate to the needs of the community."
In briefing, CMS specifies that Petitioner's alleged noncompliance is with 42 C.F.R. § 482.41(b), which is titled: "Standard: Life safety from fire."2 CMS Br. at 9-10.
CMS asserts that a hospital's outpatient department's compliance with the physical environment requirements include compliance with the LSC, which comprises fire safety requirements published by the National Fire Protection Association (NFPA) in 2012.3
A preliminary and essential issue in determining whether the Sleep Disorders Center complies with the LSC is to determine its occupancy classification under the LSC. Each occupancy classification has its own LSC requirements. See CMS Ex. 9.
The parties disagree as to the occupancy classification of the Sleep Disorders Center. CMS contends that the Sleep Disorders Center is properly classified as an ambulatory health care occupancy, rather than a business occupancy, and as such, failed to meet the LSC requirements applicable to the ambulatory health care occupancy. CMS Br. at 9-13; CMS Reply at 2-3. Petitioner argues, however, that the Sleep Disorders Center manifests the characteristics, as noted in CMS guidance interpreting the LSC, of a business occupancy, and therefore, the LSC requirements for an ambulatory health care occupancy are not applicable. P. Br. at 18; P. Add. Br. at 3-4. Further, Petitioner contends that even if CMS is correct as to the occupancy classification, each of the rooms used by the sleep lab meets or exceeds the LSC requirements for an ambulatory health care occupancy given that Ohio hotels must comply with the Ohio Fire Code, which is more stringent than the LSC. P. Br. at 8, 18-19; P. Add. Br. at 4-7; Combs Decl. ¶ 4.
Based on my review of the record, I find that the Sleep Disorders Center qualifies as a business occupancy and, therefore, was subject to the LSC requirements applicable to business occupancies rather than the more stringent LSC requirements for ambulatory health care occupancies.
In examining this issue, I note that both parties rely on CMS Ex. 8. This exhibit is a December 17, 2010 (revised on February 18, 2011) memorandum from the CMS Director of Survey and Certifications titled "Hospital and Critical Access Hospital (CAH) Facility Life Safety Code (LSC) Occupancy Classification Update (Reference #S&C-11-05-LSC, revised February 18, 2011). CMS Ex. 8 at 1. In this memorandum, CMS announced:
We are updating [SOM] guidance for hospitals and CAHs to assure alignment with the LSC occupancy classification provisions. In particular, we are providing clarification on determining the appropriate occupancy classifications for separated, non-contiguous or off-site facilities that are part of a certified Hospital or CAH. In accordance with 42 CFR 482.41(b) and § 485.623(d), Medicare-participating hospitals and CAHs must meet the applicable provisions of the 2000 Edition of the National Fire Protection Association (NFPA) 101: LSC. The LSC permits certain hospital and CAH component facilities to be classified as occupancy types other than Health Care Occupancy, including Ambulatory Health Care, Business, and others. These other occupancy types have less stringent requirements. Accordingly, we are updating the interpretive guidance currently found in SOM Appendices A, I and W to ensure that it appropriately reflects the LSC requirements concerning occupancy classification.
CMS Ex. 8 at 1.
Although it is unclear when CMS released the final versions of the SOM Appendices, CMS indicated the memorandum's guidance was "effective immediately" and that "all certification personnel [were to be] appropriately informed as to using this guidance within 30 days." CMS Ex. 8 at 4. Inasmuch as CMS has not asserted that there were subsequent changes which would impact this case, and both parties have relied on CMS Exhibit 8, I find that they agree that CMS Exhibit 8 is applicable to this case.
As outlined in CMS Exhibit 8, each occupancy classification has certain attributes. The memorandum quotes the LSC definition of an Ambulatory Health Care Occupancy first and then interprets it as follows:
Section 18.104.22.168 of the LSC defines a[n] Ambulatory Health Care (AHC) Occupancy as ‘[a] building or portion thereof used to provide services or treatment simultaneously for four or more patients that: (1) provides on an outpatient basis, treatment for patients that renders the patients incapable of taking action without assistance of others; or (2) provides, on an outpatient basis, anesthesia that renders the patient
incapable of taking action for self-preservation under emergency conditions without the assistance of others.' Considering the definition of an AHC provided in section 22.214.171.124 and the occupancy classification exemption provided in sections 18/126.96.36.199.7, a hospital or CAH component facility initially considered to be Health Care Occupancy but which does not provide either sleeping accommodations or medical treatment or services on a 24-hour basis, may be classified as another occupancy type. For example, if it provides treatment or services to patients who are mostly incapable or rendered incapable by treatment or anesthesia provided by the facility, it must be classified as a new or existing AHC Occupancy.
CMS does not consider the number of patients treated when determining an AHC [O]ccupancy classification. Furthermore, CMS does not consider whether or not a patient has been ‘rendered' incapable of taking action for self-preservation by the facility; rather, the only consideration is whether the patient is capable or incapable of self-preservation. Therefore, occupancy classification must be determined regardless of the number of patients being served or whether or not a patient has been rendered incapable of self-preservation by a hospital or CAH component facility.
For Ambulatory Health Care Occupancy:
- Facility does not provide sleeping accommodations;
- Facility does not provide medical treatment or services on a 24-hour basis;
- Facility provides anesthesia services; and
- Patients are mostly incapable of self-preservation.
CMS Ex. 8 at 3 (emphasis omitted).
In contrast, to qualify as a business occupancy, a facility must have the following attributes:
For Business Occupancy:
- Facility does not provide sleeping accommodations;
- Facility does not provide medical treatment or services on a 24-hour basis;
- Facility does not provide anesthesia; and
- Patients are mostly capable of self-preservation.
CMS Ex. 8 at 4 (emphasis omitted).
With respect to the attribute of self-preservation, CMS, in its memorandum, further elaborated:
A patient may be incapable of self-preservation due to many factors, including, but not limited to, age, physical or mental disability, medical or therapeutic interventions, medication reactions, etc. In addition, when determining the ability for self-preservation, consideration should be given to both the characteristics of current patients and the characteristics of patients the facility is likely to provide medical treatment or services to in the future, as evidenced by the provider's own advertisement and clientele to which the provider holds itself out to serve.
CMS Ex. 8 at 4 (emphasis added).
According to CMS, the Sleep Disorders Center is appropriately classified as an AHC Occupancy because the center's patients are mostly incapable of self-preservation. In support of its position, CMS questions whether eight-year-old children and individuals using wheelchairs could "independently use the staircase from the fifth floor." CMS Reply at 3. CMS questions also whether, in an emergency, patients would be able to unhook and remove the testing equipment. CMS Reply at 3. As a result of CMS's conclusion that the Sleep Disorders Center is an AHC Occupancy, CMS then also concludes that the Sleep Disorders Center setup fails to comply with the LSC's requirements for an AHC Occupancy. CMS Br. at 12-17.
Petitioner contends in response that the Sleep Disorders Center's patients "generally are capable of self-help during an emergency." P. Br. at 8. Petitioner argues that CMS inaccurately portrayed its patient population and failed to consider the "actual demographics" of potential sleep study patients. P. Add. Br. at 3-4. According to Petitioner, the patients are not anesthetized, and, therefore, would not have any difficulty awakening from their sleep studies when a fire alarm sounded or taking off equipment. P. Add. Br. at 3. Additionally, Petitioner argues that, even if the Sleep Disorders Center is considered an AHC Occupancy, the hotel rooms used by the patients meet or exceed the LSC standards applicable to AHC Occupancies. P. Br. at 7-8, 18-19.
I am unpersuaded by CMS's reasoning, which is flawed. CMS did not adequately consider the characteristics of the Sleep Disorders Center's patients. CMS Ex. 8 at 4. As I explain below, my review of the record and application of the principals in CMS's revised December 17, 2010 memorandum reveals that the Sleep Disorders Center sufficiently demonstrates the attributes of a business occupancy rather than an AHC Occupancy.
Petitioner asserts, and CMS has not disputed, that the Sleep Disorders Center patients are not subject to anesthesia as part of any tests. The evidence of record does not indicate that anesthesia is used. See Foldvary-Schaefer Decl. ¶ 7 (mentioning only electrodes and CPAP machines when discussing sleep studies without mention use of anesthesia). CMS's own memorandum states that a facility must provide anesthesia services to patients to qualify as an AHC Occupancy, and the absence of such services would qualify a facility as a business occupancy. CMS Ex. 8 at 3. CMS offered no rationale as to why, in this case, an approach contrary to that guidance should be applied.
Regarding the question as to whether the facility patients are mostly able to engage in self-preservation if there is an emergency, CMS's guidance notes that, when determining whether patients are capable of self-preservation, it is necessary to consider their characteristics, "as evidenced by the provider's own advertisement and clientele to which the provider holds itself out to serve." CMS Ex. 8 at 4. According to its treatment guide and website, the Sleep Disorders Center performs "[s]leep studies for adult patients and adolescents ages 8 and older" and diagnoses and provides treatment options for various adult and pediatric sleep disorders. CMS Ex. 5 at 4; CMS Ex. 6. Petitioner's literature characterizes the studies at the Sleep Disorders Center as "[r]outine sleep studies." P. Ex. 14 at 43; P. Ex. 18 at 27. None of the sleep disorders described in Petitioner's treatment guide indicate that individuals with sleep disorders necessarily have any cognitive or ambulatory problems. See CMS Ex. 6. Further, that document indicates that 75% of the adult population experiences sleep disorder symptoms at least a few nights a week. CMS Ex. 6 at 1. Therefore, patients at the Sleep Disorders Center come from a general cross-section of society and are not particularly infirmed or mentally compromised individuals. Certainly, there will be individuals who have sleep issues due to comorbid medical conditions, but this is only one of among many reasons patients go to the Sleep Disorders Center for routine sleep testing. CMS Ex. 6 at 10.
I note also a document in the record containing "Patient care instructions for sleep lab studies." P. Ex. 17. Among the instructions is the following: "Nurse services are not available. Notify us if you have a disability that requires special assistance. You may be required to have a caregiver present during testing." 4 P. Ex. 17 at 1. While these
instructions address the situation whereby a disabled individual may be required to have a caregiver during testing, their very wording indicates that this is not the typical situation with sleep lab patients. A reasonable inference to be drawn from these instructions is that, for the most part, patients who undergo testing at the Sleep Disorders Center do not have a physical disability, are mentally competent, and do not require any special assistance from caregivers. And for those who do, a caregiver will be required to be present during the testing.5
Moreover, I am unpersuaded by CMS's claim that removal of the testing equipment attached to patients during testing would be unduly difficult and hinder a patient's evacuation in an emergency. Nancy Foldvary-Schaefer, D.O., a neurologist and the Director of Petitioner's Sleep Disorders Center, testified that a "technologist will escort patients to the room where their sleep studies are performed. Each room has a self-closing door which is closed when the patient receives instructions, has monitoring devices attached, and undergoes their sleep study." Foldvary-Schaefer ¶ 5. Dr. Foldvary-Schaefer further testified:
As part of preparing the patient for their sleep study, the technologist will educate the patient on how to remove the monitoring devices in case of emergency. These devices are not restrictive as they fasten on a patient's chest and abdomen where a patient can easily unfasten them. They also have electrodes attached to a patient's head and legs using an adhesive that are easily removed. For those patients who are undergoing a continuous positive airway pressure (CPAP) test, the mask that is used would be similar to (if not the same as) masks they use at home. These masks are easily removed.
Foldvary-Schaefer Decl. ¶ 7. CMS did not cross-examine Dr. Foldvary-Schaefer or provide any evidence or testimony to contradict her testimony. As the Director of the Sleep Disorders Center and a physician, I fully credit Dr. Foldvary-Schaefer's testimony as to the instructions given to patients and the relative ease with which the testing sensors can be removed by patients.
Given that no anesthesia is used, that the majority of patients tend to be individuals who do not have any physical and mental limitations, and that the limited number of disabled and child patients will have caregivers present during the testing, I find it highly unlikely that, in the event a fire alarm went off, patients would struggle to take off the testing equipment or be unable to exit the building on their own. The fact that some patients
may be disabled and require caregivers during testing does not preclude a finding that most of the sleep lab patients would be able to leave the building unassisted during emergency conditions.
In light of the characteristics of the Sleep Disorders Center, applying CMS's December 17, 2010 memorandum, I conclude that its appropriate classification for purposes of the LSC is that of a business occupancy, and not an AHC Occupancy.6 As such, the Sleep Disorders Center would be subject to the requirements of Chapter 39 of the LSC, which contains the fire safety provisions applicable to a business occupancy.
In its briefing, CMS did not argue that the Sleep Disorders Center fails to meet the requirements of LSC Chapter 39. Rather, CMS only maintains that the Sleep Disorders Center fails to satisfy the LSC fire safety requirements applicable to AHC Occupancies, which are found in LSC Chapters 20 and 21. CMS notes first that the Marriott hotel is a separate and distinct occupancy type, and claims that it would be classified "as a type of residential occupancy."7 CMS Br. at 12. CMS goes on to argue that both the 2012 and 2000 editions of the LSC "require . . . an ambulatory health care occupancy, like [the Sleep Disorders Center]," to "be separated from other tenants and occupancies by minimum one-hour fire resistance-rated partitions and self-closing doors." CMS Br. at 16 (citing CMS Ex. 9 at 18, 24 and CMS Ex. 10 at 30). CMS notes that there was only a moveable sign which stated "Quiet Please, Sleep Study in Progress" to identify the Sleep Disorders Center space. CMS Br. at 13. In CMS's view, Petitioner violated the LSC and "potentially jeopardize[d] the safety, privacy and confidentiality of patients" because the Sleep Disorders Center block of six rooms was not "separated from" the rest of the Marriott hotel by the requisite wall and door. CMS Br. at 12, 16.
In response, Petitioner argues that, because Ohio hotels are subject to the very stringent fire safety requirements of the Ohio Fire Code, the hotel rooms used by the Sleep Disorders Center necessarily meet, or even exceed, the LSC requirements applicable to
business occupancies and AHC Occupancies. P. Br. at 8, 18-20. As support, Petitioner offered the testimony of Jeffrey L. Combs, who has served as the Fire Marshall for the Cleveland Clinic since 1982. In his declaration, Mr. Combs stated that "[p]art of my responsibilities as Fire Marshal include inspecting spaces used by the Cleveland Clinic in order to ensure that they comply with applicable fire and life safety codes and regulations. The [Sleep Disorders Center] falls within my responsibilities and I have inspected that location several times." Combs Decl. ¶ 2. Mr. Combs further testified:
The Marriott Courtyard where the Cleveland Clinic sleep lab is located in a hotel and must comply with both the Ohio regulations for operating a hotel and the [NFPA] Life Safety Code provisions applicable to hotels. The Ohio State Fire Marshal enforces the Ohio Fire Code. In the case of the Marriott Courtyard, the applicable Ohio Fire Code when the Cleveland Clinic sleep lab opened in 2013 would have been contained within the 2011 the [sic] Ohio Building Code."
Combs Decl. ¶ 3. Mr. Combs testified further that "[t]he Ohio state requirements for hotels meet and even exceed the Life Safety Code in several important aspects. Among other things, those Ohio Building Code requirements include (i) a requirement that each guest room be separated from each other guest room by a fire barrier rated at one hour . . . (ii) a requirement that each guest [room] have [sic] a self-closing fire safe doors . . . (iii) a requirement that the room doors remain closed except when in use." Combs Decl. ¶ 4. According to Mr. Combs, "[s]atisfying these requirements would also satisfy the requirements under the Life Safety Code applicable to Ambulatory Health Care occupancies under Ch. 188.8.131.52 (requiring 1 hour fire barriers and self-closing fire safety doors)." Combs Decl. ¶ 4.
Mr. Combs testified that all the rooms had "one-hour fire barrier envelopes with solid ceilings" and "20 minute labeled fire doors with etch labeled frames which meet the requirements of NFPA101, Life Safety Code 2012 to comply as opening protectives for one hour fire barriers." Additionally, Mr. Combs found that each room was equipped with a smoke detector, automatic fire sprinkler, and "video monitoring device so that occupants can be observed." Combs Decl. ¶ 5. According to Mr. Combs, the aforementioned features "meet and exceed" any LSC requirements "applicable to Ambulatory Health Care occupancies under Ch. 21." Combs Decl. ¶ 5.
Mr. Combs also pointed out that his assessment is supported by the fact that "[i]n order to operate as a hotel the Marriott Courtyard must secure a license which is only issued and renewed each year if the hotel passes an inspection by the State Fire Marshal." Combs Decl. ¶ 3. And, "[t]he Marriott Courtyard could not pass inspection by the State Fire Marshal and secure a license unless it satisfied the Ohio Building Code requirements for
each guest room, which means it would also meet the Life Safety Code requirements." Combs Decl. ¶ 4.
I fully credit Mr. Combs's testimony. CMS did not cross-examine him and did not provide evidence to dispute his testimony. Mr. Combs has lengthy experience in the field of fire safety, having served for nearly forty years as the Fire Marshal for a large health care institution. He is responsible for ensuring that the Sleep Disorders Center is in proper compliance with applicable fire codes and has inspected that center for that purpose on multiple occasions.
As I indicated above, CMS did not assert that the Sleep Disorders Center failed to meet the LSC requirements for business occupancies. Therefore, I accept that as an undisputed fact. Further, in light of Mr. Combs's testimony that the Sleep Disorders Center meets or exceeds the LSC's requirements for an AHC Occupancy, I consider that further support that the Sleep Disorders Center also meets the LSC's reduced requirements for a business occupancy.
Finally, I address CMS's assertion that because "the final determination of the appropriate occupancy classification of a health care facility rests with CMS, the Petitioner's argument [regarding the appropriate occupancy classification of its Sleep Disorders Center] must be rejected." CMS Reply at 2. CMS cites no statute, regulation, or CMS Ruling for this proposition, but rather cites an ambiguous portion of the LSC. CMS states that LSC § 184.108.40.206, "makes clear that ‘[o]ccupancy classification shall be subject to the ruling of the authority having jurisdiction where there is a question of proper classification in an individual case." CMS Reply at 2 (citing CMS Ex. 9 at 4 and CMS Ex. 10 at 7). However, is CMS such an authority? If so, CMS does not cite LSC § 1.6 that states the LSC "shall be administered and enforced by the authority having jurisdiction by the governing authority." If one were to conclude CMS is the "authority" that classifies occupancies under the LCS, then CMS is subject to the "governing authority", which would be the Secretary.
CMS's reliance on the LSC is misplaced. It is true that hospitals "must meet the applicable provisions and must proceed in accordance with the [LSC]." 42 C.F.R. § 482.41(b)(1)(i). But this does not mean that the LSC speaks with the force of law to preclude due process and administrative review of CMS's reasons for denying provider-based status. Had the Secretary intended CMS to have unappealable authority to decide essential facts and law in provider-based status appeals, the Secretary would have so indicated in the regulations.
For example, the Secretary understood his authority and directed, by regulation, that "[o]utpatent surgical departments must meet the provisions applicable to Ambulatory Health Care Occupancies, regardless of the number of patients served." 42 C.F.R. § 482.41(b)(1)(i). Further, the Secretary provided himself with the discretion to
temporarily waive specific LSC provisions for hospitals, and he granted CMS the authority to determine if the state fire and safety code should apply instead of the LSC. 42 C.F.R. § 482.41(b)(2), (3). The Secretary did not grant CMS the unreviewable authority to determine the occupancy-type to be applied to providers; however, he did expressly make CMS's determination regarding provider-based status appealable to an ALJ and ultimately appealable to the Departmental Appeals Board.
I recognize CMS's authority to determine whether the Sleep Disorders Center qualifies for provider-based status under 42 C.F.R. § 413.65, and that this can entail determining the occupancy-type of the provider in order to apply the LSC. However, the Secretary included provider-based status determinations in his list of "Initial determinations by CMS" that are subject to the review procedures in 42 C.F.R. part 498. 42 C.F.R. § 498.3(a)(1), (b)(2). Further, as occurred here, those regulations allow a revised determination to stand unless a hearing is requested before an ALJ. 42 C.F.R. § 498.32(b)(1). The ALJ decision is in turn subject to review by an appellate panel of the Departmental Appeals Board. 42 C.F.R. § 498.80.
CMS's assertion that it has the unreviewable authority to determine the occupancy-type of the Sleep Disorders Center is particularly odd given that CMS recognized in this proceeding that "CMS's determination on reconsideration that a site did not qualify for provider-based status is an initial determination subject to de novo review by [the ALJ]." CMS Br at 1. A major reason why CMS now says provider-based status should be denied is based on CMS's conclusion that the Sleep Disorders Center should be considered an ambulatory health occupancy. Barring a statement in the regulations otherwise, my de novo review of CMS's action includes making findings of fact and conclusions of law on all the reasons CMS denied such status, including whether CMS correctly determined the occupancy classification of the Sleep Disorders Center. See 42 C.F.R. § 498.74(a).
Finally, I note that CMS never made an official finding in a determination that the Sleep Disorders Center was an AHC Occupancy. In its briefing, CMS simply points to emails from CMS personnel in which they make conclusory statements that the Sleep Disorders Center must meet the requirements for AHC Occupancies. CMS Br. at 11; CMS Ex. 7 at 8, 10. They provide no insight into whether those CMS employees considered the guidance in the revised December 17, 2010 memorandum before making such a claim. While the Sleep Disorders Center is providing medical testing, CMS does not mention that the testing is not invasive and mostly involves generally healthy patients who are simply sleeping or trying to sleep while being monitored. The Sleep Disorders Center is not providing treatment or procedures onsite. Following CMS's revised December 17, 2010 memorandum and looking at information Petitioner provides to the public, there is no basis from the record to conclude that the patients being tested are mostly infirmed or unable to simply navigate their way out of a hotel by following normally posted exit signs.
Thus, I conclude that the record supports that the Sleep Disorders Center complies with the requirements of both 42 C.F.R. § 413.65(g)(3) and 42 C.F.R. § 413.65(g)(8).
3. The Sleep Disorders Center satisfies the definition of a "department of a provider" at 42 C.F.R. § 413.65(a)(2).
CMS also denied provider-based status for the Sleep Disorders Center on the grounds that it did not meet the definition of a "department of a provider" at 42 C.F.R. § 413.65(a)(2). The regulation at 42 C.F.R. § 413.65(a)(2) provides, in relevant part:
Department of a provider means a facility or organization that is either created by, or acquired by, a main provider for the purpose of furnishing health care services of the same type as those furnished by the main provider under the name, ownership, and financial and administrative control of the main provider, in accordance with the provisions of this section. A department of a provider comprises both the specific physical facility that serves as the site of services of a type for which payment could be claimed under the Medicare or Medicaid program, and the personnel and equipment needed to deliver the services at that facility . . . .
In explaining its rationale, CMS cites to its discussion in both the July 20, 2016 initial determination and the July 9, 2018 revised reconsidered determination. CMS Reply at 5. In the July 20, 2016 initial determination, CMS described the characteristics which would determine whether a hospital component met the definition:
A department of a provider requires separation from any other facility. Sufficiently separated space is indicated by such features as exclusive entrance, waiting, and registration areas, permanent walls, and a distinct suite designation recognized by the United States Postal Service if the hospital department does not occupy an entire building.
CMS Ex. 4 at 2. CMS went on to explain, in relevant part:
CMS does not recognize facilities that share space, including the sharing of space with a non-healthcare facility, to meet the definition of a "department" of a hospital. A facility that shares space with a non-healthcare facility cannot have provider-based status as a department of a hospital. The framework for this position is found in the Title XVIII of the Social Security Act (SSA), the Code of Federal Regulations (CFR), and official CMS guidance found in the Internet-Only
Manual (IOM) 100-07 the State Operations Manual. This distinction is necessary to maintain the integrity of what CMS considers to be a hospital and to protect the Medicare program and its beneficiaries from possible abuses as hospitals seek to maximize Medicare reimbursement.
CMS Ex. 4 at 2.
In the revised reconsidered determination, CMS explained its basis for concluding that the Sleep Disorders Center was not a hospital outpatient department, as follows:
Per 42 C.F.R. § 413.65(a)(2), a department of a provider "comprises both the specific physical facility that serves as the site of services of a type for which payment could be claimed under the Medicare or Medicaid program, and the personnel and equipment needed to deliver the serves at that facility." Information available on the Main Provider's website . . . instructs patients to check in with the hotel's front desk staff as well as inform the front desk staff what the patient is there for, which is further indication that the location of [the sleep lab] is not a hospital space. Sleep study and other hotel rooms are comingled and accessible to all hotel guests and hospital patients, and because hotel guests have access to the area where hospital services are provided, it potentially exposes patients and hospital staff to health and safety risks.
CMS Ex. 1 at 3.
Petitioner points out that nowhere in the regulations or published policy does there exist a standard or requirement which prohibits "a hospital's remote location from sharing common areas with other entities." P. Br. at 3-4; see P. Br. at 15, 23. Petitioner suggests further that CMS has improperly imposed a rule barring the "commingling of physical space" without engaging in notice and comment rulemaking, in violation of the Administrative Procedure Act. P. Br. at 10-11, 23-25.
CMS contends that the relevant portion of 42 C.F.R. § 413.65(a)(2) is the sentence referring to a "specific physical facility . . . and the personnel and equipment needed to deliver the services at that facility." CMS Reply at 5. In taking this view, CMS appears to interpret the definition of "department" as setting out specific elements a department is required to have, rather than simply describing what a department comprises. As noted above, in the July 20, 2016 revised initial determination, CMS claimed that there existed a "framework" for its position based on Title XVIII of the Act, the C.F.R., and its own CMS guidance in the SOM. CMS Ex. 4 at 2. However, CMS referred to the
aforementioned authorities in only the most general terms, without providing any specific citations. In the revised reconsidered determination, CMS did not explain this "framework" further or even refer to it.
I am not persuaded by CMS's argument that the Sleep Disorders Center does not qualify as a department based on its setup within the Marriott Courtyard hotel and the apparent comingling of sleep lab space with hotel space. CMS has cited neither a regulation nor any interpretative authority in support of its interpretations of the meanings of "department" or "specific physical facility." In the absence of any regulatory definitions or guidance, I do not find that the Sleep Disorders Center's physical environment lacked the basic characteristics necessary to be considered a "specific physical facility."
If, as CMS urges, one of the criteria to qualify as a "department" is to have a "specific physical facility," I note that such an entity is neither defined nor explained in 42 C.F.R. § 413.65(a)(2). Nor is "specific physical facility" explained anywhere in subsections (d) and (e) of 42 C.F.R. § 413.65, which set out explicit requirements which must be met by a hospital's off-campus facility seeking provider-based status. I note that while the requirements include criteria pertaining to a remote facility's location in relation to the hospital, there are no provisions in 42 C.F.R. § 413.65(d) and (e) regarding the physical requirements or set-up of the remote facility.8
It is obvious that the definition of "department" at 42 C.F.R. § 413.65(a)(2) contemplates that there will be actual physical space set aside and associated with the remote entity for it to qualify as a hospital department. However, other than this observation, I find that 42 C.F.R. § 413.65(a)(2) is ambiguous as to what characteristics a "specific physical facility" must have. CMS contends that the Sleep Disorders Center fell short because, among other things, it was not a separate space physically partitioned off by a door or wall and did not have an exclusive entrance to prohibit interaction between patients and hotel staff. CMS Ex. 1 at 3; CMS Ex. 4 at 2; CMS Br. at 7; CMS Reply at 5. That might be a reasonable requirement; however, I am unable to impose such a specific requirement based on the text in the definition.
Contrary to CMS's position, I find that Petitioner's Sleep Disorders Center has the most basic characteristics one would expect of a "specific physical facility" as that term is used in 42 C.F.R. § 413.65(a)(2). It is true that the Sleep Disorders Center and the Marriott hotel shared hallways, elevators, and stairs, and the two were not separated by a door. P. Br. at 2, 6-7. Nevertheless, despite the fact that some comingling of space with the hotel apparently existed, there is no dispute that the Sleep Disorders Center's rooms themselves were grouped together at the end of a corridor under Petitioner's exclusive control and were not being used as regular guest rooms. Foldvary-Schaefer Decl. ¶ 2.
Moreover, I find credible Petitioner's assertion that the Sleep Disorders Center's rooms were not accessible to any hotel guests. P. Br. at 6 (citing Foldvary-Schaefer Decl. ¶ 3). If the Sleep Disorders Center were sharing the same physical space as the hotel or if hotel rooms were randomly assigned by Marriott throughout the hotel only when testing was scheduled to take place, it would be a different situation; however, that is not the case here. The Sleep Disorders Center consists of a separate, contiguous block of six rooms at the end of a corridor on the fifth floor; there is no comingling of space whatsoever between these rooms and the other hotel rooms used by hotel guests.
CMS recognized that the Sleep Disorders Center had its own dedicated physical space that was clearly marked as the Sleep Disorders Center. When CMS concluded that 42 C.F.R. § 413.65(d)(4) was not a basis for denying provider-based status in this case, it found the following: "CMS notes that the Main Provider provided supporting documentation and videos sufficiently showing that [the Sleep Disorders Center] is held out to the public as part of the Main Provider, such as in-room documentation and signage located on common entryway doors at the location, main elevator bank, on the floor location of [the Sleep Disorders Center], and immediately outside of the [Sleep Disorders Center]." CMS Ex. 1 at 2 (emphasis added). Therefore, while there is no wall and door separating the Sleep Disorders Center, in the absence of any authority to provide a more restrictive meaning to the phrase "specific physical facility," I find that Sleep Disorders Center comprises separate physical space within the Marriott and the space is sufficiently sectioned off from the rest of the hotel even if its entrance and some common areas are shared with the hotel.
In this decision, I am mindful that all rules, requirements, and statements of policy that establish or change a substantive legal standard governing the scope of Medicare benefits, payment of services, or eligibility to furnish services or receive benefits are to be promulgated through notice and comment rulemaking. 42 U.S.C. § 1395hh(a)(2). This requirement is broader than the Administrative Procedure Act's requirements for rulemaking. See Azar v. Allina, 139 S.Ct. 1804, 1810-14 (2019). Because provider-based status affects Medicare reimbursement, I am obligated to follow the relevant legal authority and cannot implement CMS's ad hoc interpretations when there is ambiguity.
I thus reject CMS's position that Petitioner's sleep lab did not qualify as a "department" inasmuch as CMS has failed to specify any provisions of the Act or regulations to support its interpretation of 42 C.F.R. § 413.65(a)(2).9 Were I to accept CMS's interpretation, I would be applying unwritten requirements or standards, which do not appear in the regulations. This I decline to do. Accordingly, I find that the Sleep Disorders Center satisfies the definition of a "department of a provider" at 42 C.F.R. § 413.65(a)(2).
4. Petitioner is entitled to provider-based status for the Sleep Disorders Center.
I have concluded that the Sleep Disorders Center, which is remotely located in the Marriott Courtyard hotel, complied with 42 C.F.R. §§ 413.65(g)(3) and (g)(8), as well as 42 C.F.R. § 413.65(a)(2). As a result, I further conclude that CMS did not have a legitimate basis to deny provider-based status for Petitioner's remote location of its sleep clinic.
Based on the foregoing, I conclude that the Sleep Disorders Center complied with 42 C.F.R. § 413.65(a)(2), (g)(3), and (g)(8). Accordingly, I reverse CMS's revised reconsidered determination denying provider-based status.
Scott Anderson Administrative Law Judge
1. While various appeals have been pending in the appeal process, Petitioner modified the Sleep Disorders Center to meet the concerns that CMS had. However, this case involves the denial of provider-based status as the Sleep Disorders Center was originally configured. Therefore, later modifications are not relevant to my decision.
- back to note 1 2. CMS's revised reconsidered determination primarily cited non-compliance with 42 C.F.R. § 482.41 based on security concerns: "Carving out a space and leasing hotel guest rooms, where hotel guests, staff, and visitors can freely walk through the area where patients are receiving Medicare services, does not satisfy physical environment requirements and potentially jeopardizes the safety, privacy, and confidentiality of patients." CMS Ex. 1 at 3 (emphasis added). Privacy, safety, and confidentiality are covered under the condition of participation concerning patient's rights and not the physical environment. See 42 C.F.R. § 482.13(c), (d). But CMS did not cite a deficiency of 42 C.F.R. § 482.13, so it is not applicable to this case. As indicated in the quote from the revised reconsidered determination, CMS stated the basis was a failure to meet "physical environment requirements," citing 42 C.F.R. § 482.41. In CMS's briefing, CMS focuses on paragraph (b) of § 482.41, which is related to fire protection and the LSC. I consider this a modification to CMS's basis for denial and I limit my review and discussion to alleged noncompliance with § 482.41(b).
- back to note 2 3. According to CMS, the Sleep Disorders Center is subject to the provisions of the 2012 edition of the LSC, which was in effect when CMS issued its July 20, 2016 initial determination. However, CMS also notes that the relevant LSC provisions did not substantive change between the 2000 and 2012 editions of the LSC. CMS Br. at 9 n.4.
- back to note 3 4. CMS Ex. 3-E (video clip) shows that only one of the sleep clinic's rooms is for patients with special needs.
- back to note 4 5. In that same document, Petitioner provides the following instruction: "If you are under 18 years of age, a parent or guardian is required to stay with you in the Sleep Disorder Center for the entire duration of your testing." P. Ex. 17 at 1.
- back to note 5 6. With respect to whether the Sleep Disorders Center provides sleeping accommodations, I note that a patient may spend the night sleeping in the room as part of his or her sleep study. Therefore, the rooms are a necessary part of the testing and are not being used as accommodations. The instructions given to patients underscores this: "[T]he room will not be available until 7:00 PM. All participants are required to leave when testing is complete." P. Ex. 17 at 1. CMS apparently recognizes that the rooms are being used in this manner, for it has not argued that Petitioner's sleep lab is providing sleeping accommodations.
- back to note 6 7. CMS cites to the definition of "Hotel" found in the LSC, which states: "A building or groups of buildings under the same management in which there are sleeping accommodations for more than 16 persons and primarily used by transients for lodging with or without meals." CMS Br. at 12 (citing CMS Ex. 9 at 5).
- back to note 7 8. CMS points out that the regulation governing Independent Diagnostic Testing Facilities expressly precludes a hotel-based testing facility under 42 C.F.R. § 410.33(g)(3). CMS Br. at 17 n.5. Further, CMS states that the final rule promulgating that regulation indicated that several commentators stated that a hotel or motel room is not an appropriate place for diagnostic testing. 72 Fed. Reg. 66,221, 66,289-90 (Nov. 27, 2007). Citing to that regulation only highlight that there is no comparable prohibition concerning hospitals or provider-based status determinations. I cannot give effect to a different regulatory scheme to uphold the denial of provider-based status. The Secretary could have easily revised 42 C.F.R. § 413.65 to add a similar prohibition as appears in § 410.33(g)(3), but did not do so.
- back to note 8 9. Nor did CMS cite to interpretative guidance in the SOM.
- back to note 9