McLaren Macomb d/b/a Shelby Psych Operator LLC, ALJ Ruling 2024-14 (HHS-CRD September 19, 2024)

ORDER OF DISMISSAL

This Order grants the Centers for Medicare and Medicaid Services’ (CMS) motion to dismiss. Petitioner, McLaren Macomb, is not seeking review of an action that is subject to ALJ review. Therefore, this matter must be dismissed.

I. Procedural History

On February 1, 2023, McLaren Macomb d/b/a Shelby Psych Operator LLC (hereinafter “Petitioner”) timely requested a hearing before an administrative law judge (ALJ) to contest the effective date of its Medicare enrollment (P. Hrg. Req.). Petitioner filed 51 exhibits (P. Exs. 1-51) along with its hearing request.¹

On February 2, 2023, I issued an Acknowledgment Letter and Standing Pre-hearing Order (Standing Order), along with a non-discrimination notice and the Civil Remedies Division Procedures (CRDP).

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On March 9, 2023, CMS filed a combined Motion to Dismiss or for Summary Judgment and pre-hearing brief (CMS Br.), along with 22 exhibits (CMS Exs. 1-22). CMS did not offer witnesses or provide any sworn declarations.

Petitioner failed to file a pre-hearing exchange by April 13, 2023, the deadline established in the Standing Order. An Order to Show Cause (OSC) was issued on April 18, 2023, ordering Petitioner to show cause by April 28, 2023, as to why the case should not be dismissed.

Petitioner responded to the OSC on April 27, 2023, and indicated that it did not intend to abandon its hearing request. However, Petitioner again failed to submit a pre-hearing exchange or a response to CMS’ Motion to Dismiss.

A second OSC was issued on May 4, 2023, to address Petitioner’s failure to submit a prehearing exchange. Petitioner did not respond to the second OSC. However, the OSC was discharged because Petitioner’s request for hearing included substantive information and numerous exhibits to assist in rendering a decision. The record was closed, and the parties were informed that the case would be decided based on the written record.

II. Background Information

1. Petitioner is a hospital located in Shelby Township, Michigan. Ex. 4 at 1. Petitioner owns the McLaren Macomb Senior Behavioral Health Program (the Psych Unit) which was established in 2021 to address the needs of geriatric psychiatric patients. Docket 1a.
2. In June 2021, Petitioner submitted a Change of Information application to WPS Government Administrators (WPS),² to add the Psych Unit as a practice location to Petitioner’s existing CMS-855A Medicare Enrollment application form. Ex. 4. Around the same time, Petitioner filed a separate request to exclude the Psych Unit from the Prospective Payment System (PPS). P. Hrg. Req. at 2. The Change of Information application was approved on June 9, 2021. P. Ex. 6.
3. Petitioner assisted the Michigan Department of Licensing and Authority’s Federal Support and Enforcement Section (FSES) and the Federal Survey and Certification Division (FSCD) with the application process. Docket 1b at 2. A representative from FSCD informed Petitioner that a new CMS-855A application was necessary for the Psych Unit to obtain a new PPS number. Ex. 7; CMS Ex. 5.

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4. In response, on August 20, 2021, Petitioner submitted a Medicare enrollment application form CMS-855A to enroll the Psych Unit as a Medicare Part A provider enrolling in Medicare for the first time. Ex. 10 at 1; CMS Exs. 6-8.
5. The Psych Unit became a licensed state psychiatric unit on September 27, 2021, and admitted its first patient on September 30, 2021. Exs. 1, 2.
6. Through a series of emails and telephone calls, Petitioner spoke with a CMS representative to clarify what it hoped to accomplish. Exs. 23-30. Petitioner was informed that in order to enroll as a new hospital, it would need to provide licensure documents and undergo an accreditation survey. CMS Ex. 12.
7. The Joint Commission completed an accreditation survey on February 18, 2022. By letter dated April 28, 2022, Petitioner was informed that the accreditation was granted with an effective date of February 19, 2022. CMS Ex. 13; P. Ex. 11. Petitioner’s request was later sent to CMS as a request to be a “hospital-based hospital psychiatric unit to provider number: ” CMS Ex. 17.
8. On June 16, 2022, WPS issued a tie-in notice stating that the Psych Unit’s initial enrollment application was approved with a provider transaction access number (PTAN) of 23S227 and an effective date of October 1, 2022. Ex. 37; CMS Ex. 18. On the same date, CMS issued a letter stating that the request for the Psych Unit’s exclusion from PPS was granted and effective October 1, 2022. P. Ex. 39.
9. On August 12, 2022, Petitioner requested reconsideration of the Psych Unit’s effective date of participation as a Medicare provider. Docket 1b at 6. Specifically, Petitioner requested that the effective date be changed to October 1, 2021.
10. By letter dated December 6, 2022, CMS issued an unfavorable response to Petitioner’s request for reconsideration and included information on appeal rights. The reconsideration determined that no error was made in assigning October 1, 2022 as the effective date of Petitioner’s Medicare billing privileges. Docket 1a.

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III. Legal Authorities

The Social Security Act (Act) establishes the enrollment process for providers and suppliers participating in Medicare or Medicare related programs. 42 U.S.C. §§ 1302, 1395cc(j). Under the Act, “suppliers” are physicians or other practitioners, a facility or other entity (other than a provider of services) that furnishes items or services under the Medicare provisions of the Act. 42 U.S.C. § 1395x(d); see also 42 U.S.C. § 1395x(u). Providers include hospitals, skilled nursing facilities, and home health agencies. 42 U.S.C. § 1395x(u). In this case, Petitioner is a provider of services.

A provider must be enrolled in the Medicare program to receive payment from Medicare for covered items or services. 42 C.F.R. § 424.505. In addition to the various conditions of participation to obtain a provider agreement under part 489, a provider must meet the enrollment requirements specified in 42 C.F.R. § 424.510(d)(1)-(9) to successfully enroll in the Medicare program. If enrolled, the provider or supplier receives billing privileges and is issued a valid billing number effective for the date a claim was submitted for an item that was furnished or a service that was rendered. 42 C.F.R. § 424.505. The effective date of billing privileges for providers and suppliers requiring “State survey, certification or accreditation” is also governed by section 489.13. 42 C.F.R. § 424.520(a).

A provider or supplier is entitled to a hearing before an ALJ to contest an initial determination regarding one of the matters specified in 42 C.F.R. § 498.3(b). 42 C.F.R. § 498.5(l)(1)-(2) (explaining that a provider or supplier dissatisfied with a designated effective date may request a “reconsidered determination” from CMS and may thereafter request a hearing before an ALJ on the reconsidered determination). The effective date of a Medicare provider agreement or supplier approval is one of the matters listed as an initial determination in 42 C.F.R. § 498.3(b). A party that has not received an initial determination is not entitled to a hearing before an ALJ and the request must be dismissed pursuant to 42 C.F.R. § 498.70(b).

IV. Analysis

Petitioner argues that the Psych Unit met all necessary conditions to participate in the Medicare program by October 1, 2021, despite the delays and incorrect information provided by government contractors. Docket 1a at 6. Petitioner is requesting that the effective date reflect their efforts. Id. However, CMS argues that Petitioner does not have a right to a hearing because this matter involves the effective date of Petitioner’s request for exclusion from PPS, which is not an initial determination. CMS Br. at 6.

PPS is a system of reimbursement for Medicare providers. 42 C.F.R. § 412.20(a) (stating that “all covered hospital inpatient services furnished to beneficiaries during the subject cost reporting periods are paid under the prospective payment system as specified in

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§ 412.1(a)(1)”). Under PPS, payment for operating and capital-related costs of inpatient hospital services furnished by hospitals, is made on the basis of prospectively determined rates and applied on a per-discharge basis. 42 C.F.R. § 412.1(i). Certain hospitals and hospital units, including rehabilitation and psychiatric units, may be excluded from PPS. 42 C.F.R. § 412.25. Hospitals and units excluded from PPS are compensated under a different, and potentially more lucrative, reimbursement scheme. Unlike an initial enrollment application to become a provider, a PPS exclusion is provided to certain hospitals and hospital units who are already enrolled in Medicare as providers.

Though Petitioner initially filed an application to certify the Psych Unit as a freestanding hospital, that application proved to be unnecessary. The record shows that Petitioner sought to obtain, and was eventually granted, a PPS exclusion for the Psych Unit. Docket 1a at 5. Petitioner, by creating a new distinct psychiatric unit, was seeking reimbursement for that unit’s covered services outside of PPS. This is separate and distinct from seeking approval of a Medicare provider agreement, as the Psych Unit was part of an already existing provider agreement with McLaren.

The Board previously ruled that the creation of a PPS-excluded unit under similar circumstances did not give rise to a new provider agreement. The Board has explained that 42 C.F.R. § 412.25 “sets forth the requirements for PPS excluded hospital units” and “states that in order to be excluded, a distinct part . . . unit must: ‘Be part of an institution that— (1) Has in effect an agreement under part 489 . . . to participate as a hospital.’” Metropolitan Methodist Hospital, DAB No. 1694 at 3 (1999) (emphasis omitted). In Metropolitan, the Board explained that the hospital “was already qualified as a ‘hospital’ to provide inpatient services under Medicare when it sought the PPS exclusion” and that “[n]either the statute nor the regulations recognize distinct part . . . units of hospitals as independent providers of inpatient hospital services.” Id. The Board also noted that the petitioner had not sought to have the distinct part unit certified as a provider separate from Metropolitan, and that “services excluded under PPS” is not a category of appealable covered services under the Act. Id.; see also Specialty Hospital of Southern California – La Mirada, DAB No. 1730 (1999) (explaining that the assignment of a new provider number of the PPS-excluded unit “did not affect the status of either entity as a hospital or the type of services that either entity provided” but rather “the change reflected what reimbursement methodology would apply”). Petitioner does not dispute that its purpose was to obtain an exclusion from PPS, not to gain approval as a separate facility. P. Hrg. Req. at 1. Consistent with Board precedent, I find that the application for PPS exclusion is not an initial determination. Despite CMS’s error in issuing a reconsidered determination and informing Petitioner of appeal rights, I find that Petitioner does not have the right to a hearing in this matter.

Petitioner worked with the Michigan Department of Licensing and Authority’s Federal Support and Enforcement Section (FSES) to assist with the application process. Petitioner argues that FSES’s inconsistent communication and incorrect information,

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along with the impact of COVID-19, thwarted the Psych Unit’s efforts to have an effective practice location date and PPS exclusion date of October 1, 2021. Docket 1b at 2. Petitioner also argues that the Psych Unit continued to serve the community while awaiting PPS exclusion and that the October 1, 2022 effective date deprives them of funds used to treat Medicare recipients when the Psych Unit began accepting patients.³ While I am sympathetic to the delays and frustrations that Petitioner encountered while trying to obtain the PPS exclusion for the Psych Unit, I do not have the authority to provide the relief requested. Neither ALJs nor the Board may waive regulatory requirements or grant an exemption on equitable grounds. Pepper Hill Nursing & Rehab. Ctr., LLC, DAB No. 2395 at 10-11 (2011). It is important to note that Petitioner failed to respond to CMS’s motion to dismiss and has not provided any evidence to refute CMS’s arguments or prove that it is entitled to a hearing. Based on the evidence presented, I find that Petitioner is not entitled to an ALJ hearing because the effective date of a PPS exclusion is not an initial determination subject to administrative review under 42 C.F.R. Part 498.

V. Conclusion

Because Petitioner has not appealed an initial determination, I do not have the jurisdiction to hear this matter. Based on the facts and evidence set forth and pursuant to my authority under 42 C.F.R. § 498.70(b), CMS’s Motion to Dismiss is hereby GRANTED.

Endnotes

¹ Petitioner’s exhibits are not labeled in accordance with the Acknowledgment Order issued on February 2, 2023. Petitioner’s exhibits are labeled as Exs. 1- 51. For the purpose of this decision, Petitioner’s exhibits will be referred to as P. Exs. 1-51.

² WPS is a contractor working on behalf of CMS.

³ The Psych Unit admitted its first patient on September 30, 2021, and has requested an effective date of October 1, 2021.