Park Valley Inn Health Center, DAB No. 3181 (2025)

FINAL DECISION ON REVIEW OF ADMINISTRATIVE LAW JUDGE DECISION

Park Valley Inn Health Center (Petitioner), a skilled nursing facility, appeals the October 9, 2020 decision by an Administrative Law Judge (ALJ) that upheld a Centers for Medicare & Medicaid Services (CMS) contractor’s determination that December 11, 2019 is the effective date of Petitioner’s enrollment in the Medicare program. Park Valley Inn Health Center, DAB CR5733 (2020) (ALJ Decision). We affirm the ALJ Decision because it is supported by substantial evidence and free of legal error.

Legal Background

Under section 1866 of the Social Security Act, a provider of health care services may become qualified to participate in the Medicare program, and eligible for payments under that program, if the provider meets certain requirements and files an agreement with the Secretary of Health and Human Services. Section 1871 of the Social Security Act authorizes the Secretary to prescribe such regulations as may be necessary to administer Medicare. CMS administers the Medicare program and delegates certain program activities to private administrative contractors. See Social Security Act §§ 1816, 1842, 1866, 1874A (42 U.S.C. §§ 1395h, 1395u, 1395cc, 1395kk-1)¹; 42 C.F.R. § 421.5(b).

Regulations in 42 C.F.R. Part 424, subpart P (42 C.F.R. §§ 424.500-424.570) set out the “Requirements for Establishing and Maintaining Medicare Billing Privileges.” CMS must approve a provider of health care services for “enrollment” in the Medicare program for the provider to bill and receive payment for health care services furnished to Medicare beneficiaries. 42 C.F.R. §§ 400.202 (defining “Provider” to include a “skilled nursing facility” that “has in effect an agreement to participate in Medicare”), 424.500, 424.502, 424.505, 424.510, 424.516. The Medicare enrollment process includes identifying a provider, validating a provider’s eligibility to provide items or services to Medicare

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beneficiaries, identifying and confirming the provider’s practice location(s) and owner(s), and granting the provider Medicare billing privileges. Id. § 424.502 (defining “Enroll/Enrollment”).

Regulations in 42 C.F.R. Part 489 set out requirements for provider agreements and supplier approval. 42 C.F.R. § 489.2 (stating scope of Part 489). If CMS approves an enrollment application, CMS sets the “effective date” of enrollment for purposes of billing privileges. 42 C.F.R. § 489.13. Section 498.13 sets out the effective date requirements for “entities that, as a basis for participation in Medicare are subject to a determination by CMS on the basis of,” as relevant here, “[a] survey conducted by the State survey agency or CMS surveyors.” Id. § 489.13(a)(1)(i). The regulation provides that “approval is effective on the date the State agency, CMS, or the CMS contractor survey (including the Life Safety Code survey, if applicable) is completed” so long as the provider “meets all applicable Federal requirements” on that date. Id. § 489.13(b). The regulation further stipulates that “the effective date of the agreement or approval may not be earlier than the latest of the dates on which CMS determines that each applicable Federal requirement is met.” Id.

If a “provider . . . has failed to meet any one of the applicable health and safety standards,” and “if other Federal requirements remain to be satisfied” then “the effective date of the agreement or approval may not be earlier than the latest of the dates on which CMS determines that each applicable Federal requirement is met.” 42 C.F.R. § 489.13(c). For such providers, section 489.13(c)(1) sets the effective date as follows:

(1) For an agreement with a[] [Skilled Nursing Facility], the effective date is the date on which—

(i) The [facility] is in substantial compliance (as defined in § 488.301 of this chapter) with the requirements for participation; and

(ii) CMS or the State survey agency receives from the [facility], if applicable, an approvable waiver request.

42 C.F.R. § 489.13(c)(1). “Substantial compliance” is defined as “a level of compliance with the requirements of participation such that any identified deficiencies pose no greater risk to resident health or safety than the potential for causing minimal harm.” 42 C.F.R. § 488.301.

CMS’s determination of the effective date of a provider’s enrollment in Medicare is an “initial determination” subject to appeal. 42 C.F.R. § 498.3(a)(1), (b)(15). A provider whose enrollment application was approved with an effective date of enrollment may request reconsideration of the effective date. See Victor Alvarez, M.D., DAB No. 2325,

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at 3 (2010) (explaining that approval of enrollment with a particular effective date is in essence a denial of enrollment on an earlier date and the entity has a right to a hearing under 42 C.F.R. § 498.5(l)). If dissatisfied with the reconsidered determination, the provider may request a hearing before an ALJ and thereafter may request review of the ALJ’s decision by filing a written request with the Board. 42 C.F.R. § 498.5(l), (f).

Case Background²

On September 1, 2019, Petitioner acquired its skilled nursing facility from a predecessor limited liability company. CMS Ex. 40. Instead of continuing to operate the skilled nursing facility under assignment of the previous owner’s provider number and agreement, Petitioner elected to obtain new Medicare enrollment for its facility. See CMS Ex. 42. To accomplish this, Petitioner filed a change of ownership enrollment application with a Medicare contractor in August 2019.³ After CMS via the contractor requested corrections, Petitioner filed corrected applications on at least two occasions, September 4 and September 12, 2019. CMS Exs. 35, 38, 41.

The contractor recommended approval of Petitioner’s application for Medicare participation on October 2, 2019. CMS Ex. 27.

The Texas Health and Human Services Commission (commission) surveyed Petitioner twice for compliance with Medicare participation requirements. It first surveyed Petitioner for compliance with the Life Safety Code on October 31, 2019, and then for compliance with Medicare participation requirements governing skilled nursing facilities on December 10, 2019. CMS Exs. 25, 26.

The commission found two Life Safety Code deficiencies. CMS Ex. 26. Petitioner filed a plan of correction with CMS on December 12, 2019, addressing these deficiencies. CMS Ex. 24. The commission found no deficiencies concerning compliance with Medicare participation requirements. CMS Ex. 25.

On February 14, 2020, CMS determined that Petitioner was in compliance with Medicare participation requirements, certified it for participation in Medicare, and assigned Petitioner an effective participation date of January 8, 2020. CMS Ex. 12, at 1. On March 5, 2020, CMS revised the effective participation date to December 10, 2019. CMS Ex. 7. Petitioner then requested that CMS reconsider its determination and argued that its effective date of participation should be September 1, 2019. CMS Ex. 5.

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CMS issued a reconsidered determination on May 1, 2020 setting an effective date of participation of December 11, 2019, and declined Petitioner’s request to establish an effective participation date of September 1, 2019. CMS Ex. 1.

The ALJ Proceedings and Decision

Before the ALJ, CMS filed a prehearing brief and motion for summary judgment and 54 proposed exhibits, and Petitioner filed a prehearing brief and two proposed exhibits. ALJ Decision at 1-2. The ALJ admitted all the parties’ proposed exhibits. Id. at 2. As neither party requested to cross examine witnesses, the ALJ did not rule on CMS’s motion for summary judgment and based the decision “on the parties’ written exchange of evidence” and their “arguments as to the merits.” Id. at 1.

The ALJ upheld the Medicare contractor’s determination that Petitioner’s effective date of Medicare participation is December 11, 2019, the date that Petitioner was in full compliance with all participation requirements, according to CMS on reconsideration. ALJ Decision at 3-4. In addressing Petitioner’s argument that it should receive an earlier effective date of either September 1 or September 13, 2019, the ALJ wrote that “CMS may not certify a skilled nursing facility until it determines that the facility meets all applicable requirements.” Id. at 4. The ALJ rejected Petitioner’s contentions that it had been unfairly penalized for applying for a new provider certification instead of accepting assignment of the facility’s prior owner’s agreement and provider number, and that the certification process caused Petitioner to suffer financially. Id. at 5. The ALJ also acknowledged that he lacked authority to decide the equitable arguments Petitioner proffered. Id. Finally, the ALJ noted that the Petitioner “offered nothing” to demonstrate that any beneficiary did not receive services due to CMS’s determination. Id. at 5-6.

Board Proceedings and the Parties’ Arguments

Petitioner timely requested review of the ALJ Decision, arguing that the effective date of enrollment should be September 1 or 13, 2019, because Petitioner’s “application was fully corrected and completed and the facility was survey ready and substantially compliant” by those dates. Request for Review at 2. Petitioner also argues “that it is unjust, unreasonable, arbitrary and capricious for CMS to subject” it to “disparate treatment” because it “declined to accept automatic assignment of the prior operator’s Medicare Provider Agreement.” Id. at 3. Petitioner further contends that if its Medicare certification is not effective on the date it took over facility operations, or on the date “it is undisputed that [its] enrollment application was fully corrected and complete,” then its property has been unconstitutionally taken without just compensation and due process of law. Id. at 3-4. Petitioner posits that Medicare beneficiaries residing at its facility were also subject to “disparate treatment under the assignment regulations” which

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“encroach[ed] on the due process rights of the residents as Medicare beneficiaries” as well as those of Petitioner. Id. at 11.

CMS in response argues that the ALJ appropriately found that Petitioner’s effective date of participation in the Medicare program was December 11, 2019. See CMS Brief at 2. CMS contends that, under 42 C.F.R. § 489.13(c)(1)(i), this was the appropriate effective date of participation as it was “the date that the State survey agency certified that [Petitioner] had successfully completed its last certification survey meeting all Medicare health and safety standards.” CMS Brief at 2, 15. CMS also asserts that the rights of Medicare beneficiaries were protected because Petitioner “is obligated to provide services for the Medicare beneficiaries in its care” and that Petitioner’s due process argument fails because Petitioner could have no expectation of receiving reimbursement “until it was either certified as meeting program requirements or certified with deficiencies addressed in an approved plan of correction.” Id. at 18-19.

Standard of Review

The Board’s standard of review on a disputed factual issue is whether the ALJ Decision is supported by substantial evidence in the record as a whole; the standard of review on a disputed issue of law is whether the ALJ’s decision is erroneous. Guidelines-- Appellate Review of Decisions of Administrative Law Judges Affecting a Provider's or Supplier’s Enrollment in the Medicare Program, “Completion of the Review Process, ¶ (c).⁴

Analysis

1. The ALJ’s conclusion that the effective date of Petitioner’s enrollment in Medicare is December 11, 2019 is not erroneous and is supported by substantial evidence.

We first clarify the specific provisions under 42 C.F.R. § 489.13 that govern the effective date in this case. Section 489.13(b) applies when “[a]ll health and safety standards are met on the date of survey,” whereas section 489.13(c) applies when “[a]ll health and safety standards are not met on the date of survey.” 42 C.F.R. § 489.13(b), (c) (emphasis omitted). Petitioner has argued before both the ALJ and the Board that section 489.13(b) applies rather than section 489.13(c). RR at 7, 17; P. Br. to ALJ at 5, 12. CMS has argued before both the ALJ and the Board that Petitioner’s effective date is properly determined “in accordance with 42 C.F.R. § 489.13(c)(1)(i).” CMS Br. at 15; CMS Br. to ALJ at 14. The ALJ applied section 489.13(b), without discussing section 489.13(c)(1)(i). ALJ Decision at 3. We agree with CMS that section 489.13(c)(1)(i) applies here, but we find no prejudicial error by the ALJ, given that both regulatory

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paragraphs contain identical operative language. Both paragraphs provide that the effective date “may not be earlier than the latest of the dates on which CMS determines that each applicable Federal requirement is met.” 42 C.F.R. § 489.13(b), (c). Thus, under either regulation, and as the ALJ properly found, “the effective date of participation is not the date when a facility asserts that it is in compliance with requirements but is the date when CMS determines that the facility complies.” ALJ Decision at 4 (emphasis in original).

Petitioner does not challenge the ALJ’s application of the regulations in determining the effective date of Petitioners’ Medicare enrollment. See Notice of Appeal at 7. While Petitioner continues to assert that the proper effective date of its Medicare enrollment certification is September 1 or 13, 2019, it does not raise any contentions concerning the proper application of 42 C.F.R. § 489.13 that were not addressed by the ALJ. The ALJ properly determined that the effective date of the Medicare enrollment certification is December 11, 2019 based on the requirements established by 42 C.F.R. § 489.13. ALJ Decision at 3. The ALJ properly rejected Petitioner’s contention that it met these regulatory requirements prior to this date, finding that “[c]ompletion of Life Safety Code and participation requirements surveys to CMS’s satisfaction is an essential element of the requirements for qualifying as a Medicare participant.” Id. at 4.

Petitioner reiterates its claims that its facility was “survey ready and in substantial compliance with survey requirements as of September 1, 2019.” Notice of Appeal at 7. However, we agree with the ALJ’s observation that “the effective date of participation . . . is the date when CMS determines that the facility complies” with the applicable requirements. ALJ Decision at 4. Here, CMS determined on December 11, 2019 that the facility was in compliance with all applicable requirements. Id.; CMS Ex. 1. Though Petitioner asserts its facility was “survey ready” prior to this date, it is CMS’s determination of compliance, not the date of preparation for required surveys, that establishes the effective date of participation. 42 C.F.R. § 489.13(c) (“[T]he effective date of the agreement or approval may not be earlier than the latest of the dates on which CMS determines that each applicable Federal requirement is met.”).

We reject Petitioner’s argument that the October 31, 2019 Life Safety Code survey that found deficiencies did not find Petitioner out of “substantial compliance” as defined in 42 C.F.R. § 488.301, because Petitioner misreads pertinent regulatory language in isolation rather than in context. See Request for Review at 6; CMS Ex. 26. The language of section 489.13(c)(1)(i), which contains the cross-reference to section 488.301 that Petitioner relies on, must be read consistently with the entirety of section 489.13. See Ridgeview Hosp., DAB No. 2593, at 8 (2014) (rejecting petitioner’s interpretation of section 489.13 that “violates the basic principle of statutory construction that the text must always be interpreted as a whole,” as “the meaning of a word or phrase should be determined not in isolation, but in the context of the act in its entirety.”), recons. denied, DAB Ruling No. 2015-1 (Jan. 12, 2015). Section 489.13 establishes that the effective

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date is based on “[a] survey conducted by the State survey agency or CMS surveyors” and is no earlier than the date that such survey or surveys are “completed” and “may not be earlier than the latest of the dates on which CMS determines that each applicable Federal requirement is met.” 42 C.F.R. § 489.13(a)(1)(i), (b), (c).

We also reject Petitioner’s argument based upon the December 2019 survey. Petitioner would read section 489.13(c)(1)(i) in isolation as entitling it to a retroactive effective date because the deficiencies CMS found in the December survey did not render the facility out of “substantial compliance” (as defined in section 488.301), resulting in an effective date potentially earlier than the date Petitioner would have received if it had met all requirements on the survey date, per section 489.13(b)). That result defies common sense and is contrary to the plain language of section 489.13 and the intent of the effective date regulation. In the 2010 Federal Register preamble discussing, inter alia, amendments to the effective date provisions in section 489.13, CMS emphasized the importance of compliance with all applicable requirements before permitting enrollment and participation in Medicare:

We believe that the intent of the existing regulations is to require that all applicable Federal requirements, including a determination of whether the enrollment requirements have been satisfied, must be met before a provider agreement or supplier approval may be effective. Any other reading of the regulations could result in a provider or supplier being permitted to bill the Medicare program for services provided at a time when its compliance with Medicare’s requirements is unknown and possibly deficient. . . . It would not be consistent with our duty to protect the Medicare Trust Funds from unsupported claims against it to permit payment for services furnished by a health care facility after it has passed a State survey or been accredited, but before it has satisfied all other Medicare participation requirements, including enrollment requirements.

75 Fed. Reg. 50,042, 50,401 (Aug. 16, 2010).

Accordingly, Petitioner’s Medicare enrollment approval was effective as of the date on which CMS determined that the facility was in full compliance with all applicable requirements, December 11, 2019. CMS Ex. 1; ALJ Decision at 4.

II. Petitioner’s other arguments show no error in the ALJ Decision.

We conclude that there is no basis to change the effective date of the Medicare provider agreement based on any alleged delay in its Medicare enrollment certification. See Manor of Wayne Skilled Nursing & Rehab., DAB No. 2249, at 12 (2009) (holding that an “interval between the health survey and the [Life Safety Code] survey, while unfortunate, does not provide any basis to alter the effective date of [the skilled nursing facility’s]

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provider agreement”). Petitioner attempts to distinguish the facts of the case at hand from those in Manor of Wayne by alleging “substantial compliance” with survey requirements. RR at 15. However, we reiterate that the effective date of a provider is determined in accordance with 42 C.F.R. § 489.13(b) and (c), and section 489.13(c)(1)(i)’s cross-reference to section 488.301’s definition of substantial compliance cannot be read in isolation. We hold here, as we have held before, that delay in conducting a required survey does not “provide a basis on which to grant an earlier effective date.” Forest Glen Skilled Nursing & Rehab. Ctr., DAB No. 1887, at 15 (2003).

The ALJ also correctly addressed Petitioner’s claim that facilities “not accepting assignment of an outgoing facility provider Medicare agreement should be treated the same as Medicare provider agreement assignees[.]” Request for Review at 12. The ALJ stated:

[T]he rules for participation established by CMS explicitly require a facility owner to obtain a new certification determination if it chooses to operate the facility pursuant to a new provider agreement. Those are the rules of the game, and Petitioner certainly was well aware of them when it opted to file for a new provider agreement. It made a business decision not to continue operating the facility under its prior owner’s provider agreement. It had the option of doing that, but presumably to do so presented a financial risk to Petitioner that it did not wish to assume. Having made the choice not to proceed in that manner, it had to live with the consequences of it. CMS is not obligated to contravene its regulations for Petitioner’s convenience or financial gain.

ALJ Decision at 5.

We find no error in the ALJ’s assessment of Petitioner’s arguments concerning its decision not to accept assignment of the outgoing facility provider’s Medicare agreement. It is not facially unreasonable to treat new facility owners that accept assignment of the outgoing provider’s Medicare agreement differently than new owners that do not accept such assignment, because the two groups are differently situated. As the Board has explained:

The facility’s subsequent acquisition by a new owner does not diminish the facility’s culpability. Regulations provide that when a facility’s ownership changes, the existing provider agreement is automatically assigned to the new owner subject to all applicable statutes and regulations and to the terms and conditions under which it was originally issued, including compliance with applicable health and safety standards.

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Oceanside Nursing & Rehab. Ctr., DAB No. 2382, at 24 (2011) (citing 42 C.F.R. § 489.18(c), (d)). In other words, as Petitioner itself states, an assignee accepts “financial responsibility for a prior operator’s liabilities through an assignment of the Medicare provider agreement, obligations that can be financially catastrophic to the new facility operator.” RR at 10. Whether to accept an assignment and face possibly significant financial liabilities, or to reject an assignment and face possibly significant delays in obtaining Medicare enrollment and billing privileges, was indeed a “business decision” for Petitioner to make, with potential consequences that CMS is not obligated to mitigate. See ALJ Decision at 5. The ALJ did not err in reaching that conclusion.

Finally, we reject Petitioner’s constitutional and equitable arguments. Petitioner contends that determining the effective date of its Medicare enrollment application to be December 11, 2019 constitutes “effectively taking [Petitioner]’s property for public use without just compensation” in violation of the Fifth Amendment to the Constitution “and due process of law.” Request for Review at 3-4. Petitioner, however, did receive notice and an opportunity to be heard under the applicable administrative appeal regulations and did not point to any failure by CMS or the ALJ to comply with the procedures specified in those regulations. See Horace Bledsoe, M.D. and Bledsoe Family Medicine, DAB No. 2753 at 11 (2016) (finding a due process argument inapplicable because a supplier “receive[d] notice and an opportunity to be heard under the applicable administrative appeal regulations”); Patrick Brueggeman, D.P.M., DAB No. 2725 at 13-14 (2016) (disagreeing with a due process claim because the supplier “ha[d] been afforded all of the hearing rights provided by the applicable regulations”). Petitioner has taken full advantage of the opportunity to be heard provided by the regulations. But even if this were not the case, the Board may not decline to apply the regulations based on arguments of constitutional invalidity or alleged harsh economic consequences to the entity impacted. See e.g. Jeffrey K. McIlroy, MD, Inc., DAB No. 3143, at 20 (2024) (“The Board has long held that ALJs and the Board are bound by the regulations and may not declare them unconstitutional or decline to follow them on that basis.”); Mohammad Nawaz, M.D., et al., DAB No. 2687, at 14-15 (2016) (declining to address various constitutional arguments, including a claim that a challenged enrollment revocation “was an unconstitutional abridgment of valuable property”). The ALJ also did not err in concluding that “Petitioner has established no equities pertaining to its care of Medicare beneficiaries,” as there is no evidence that “any beneficiary failed to receive services” while Petitioner’s application was pending and Petitioner – not CMS – would be accountable for any denial of care. ALJ Decision at 5.

The ALJ’s determination that the effective date of Petitioner’s Medicare enrollment is December 11, 2019 is thus supported by substantial evidence and free of legal error.

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Conclusion

We affirm the ALJ Decision.

Endnotes

¹ The current version of the Social Security Act can be found at http://www.socialsecurity.gov/OP_Home/ssact/ssact.htm. Each section of the Act on that website contains a reference to the corresponding United States Code chapter and section. Also, a cross-reference table for the Act and the United States Code can be found at https://www.ssa.gov/OP_Home/comp2/G-APP-H.html.

² The factual information in this section is drawn from the ALJ Decision and the record of the ALJ proceedings and is not intended to replace, modify, or supplement the ALJ’s findings of fact.

³ The ALJ Decision states that the change of ownership enrollment application was filed August 21, 2019, ALJ Decision at 2. CMS “Application Record Data Reports” indicate that the application was submitted August 9, 2019, as Petitioner posits. Request for Review at 6; CMS Exs. 38, at 1; 42, at 1.

⁴https://www.hhs.gov/about/agencies/dab/different-appeals-at-dab/appeals-to-board/guidelines/enrollment/index.html?language=en