Pennsylvania Department of Public Welfare, DAB No. 270 (1982)

GAB Decision 270

March 31, 1982 Pennsylvania Department of Public Welfare; Docket Nos.
81-69-PA-HC, 81-145-PA-HC, 82-13-PA-HC Ford, Cecilia; Garrett, Donald
Settle, Norval


Introduction

The Pennsylvania Department of Public Welfare (State) appealed three
disallowances by the Health Care Financing Administration (Agency) of
federal financial participation (FFP) in the cost of skilled nursing
services to Medicaid recipients under Title XIX of the Social Security
Act. In particular, this decision involves the issue of the validity of
provider agreements executed by Crown Nursing Home (Crown) and the
State. The Agency claimed 1) that it had determined, based on regional
office review of state and federal survey findings, that the provider
agreement issued for the period July 1, 1979 to June 30, 1980 could not
be accepted as valid evidence that this facility met the requirements
for Medicaid participation; and 2) that the State had not certified the
facility after June 1980. Docket No 81-69-PA-HC pertains to a
disallowance of $647,709 in FFP covering services rendered by the
facility from July 1979 through May 1980. Docket no. 81-145-PA-HC
pertains to a disallowance of $3,9,635 in FFP covering services rendered
by the facility from June through October 1980. Docket No. 82-13-PA-HC
pertains to a disallowance of $612,698 in FFP covering services rendered
by the facility from November 1980 through June 1981. Neither party has
objected to joint consideration of the three appeals.

This decision is based on the State's applications for review
supplemented with documentation, the Agency's responses to the appeals,
pre-Order briefing by both parties, an Order to Show Cause issued by the
Board, and post-Order briefing by both parties. As explained below, we
uphold the disallowances.

Applicable Regulations

FFP in payments to a facility providing skilled nursing services is
available only if the facility is certified as having met all the
requirements for participation in the Medicaid program as evidenced (2)
by an agreement (provider agreement) between the single state agency and
the facility. 42 CFR 442.30(a). The execution of the provider
agreement is contingent upon certification of the facility by the state
survey agency. 42 CFR 442.12(a).

Certification of a facility with deficiencies generally is permitted
under 42 CFR 442.105 if the survey agency finds that they do not
jeopardize the patients' health and safety and there is an acceptable
plan of correction. Certification with a plan of correction for a term
of 12 months or less may be subject to an automatic cancellation clause,
providing that the certification will expire on a pre-determined date
unless the corrections have been satisfactorily completed or the
facility has made substantial progress in correcting the deficiencies.
42 CFR 442.111(c). For a facility which was previously certified with
deficiencies, 42 CFR 442.105(d) requires that:

If a facility has the same deficiency it had under the prior
certification, the (survey) agency documents that the facility --

(1) Did achieve compliance with the standard at some time during the
prior certification period;

(2) Made a good faith effort, as judged by the survey agency, to stay
in compliance; and

(3) Again became out of compliance for reasons beyond its control.

The availabilty of FFP is also subject to the "look behind"
provisions in 42 CFR 442.30(a). This section permits the Secretary to
declare the provider agreement of any skilled nursing facility invalid
if the survey agency failed to apply the applicable skilled nursing
facility certification standards or the survey agency failed to follow
the rules and procedures for certification including those pertaining to
certifying a facility with deficiencies.

Statement of the Case

According to the Agency (and uncontradicted by the State), the State
first executed a provider agreement with Crown in November 1977 for the
period November 1, 1977 through October 31, 1978, with the stipulation
that all deficiencies be corrected before another provider agreement
could be issued. In May and July 1978, the State conducted a full
health survey which revealed that the prior deficiencies were still
uncorrected. Although some deficiencies were related to the physical
plant itself and required renovation of the facility to be resolved,
other deficiencies were related to the quality of patient care.
However, the State removed an automatic cancellation clause in August
1978, stating that all Life Safety Code deficiencies had been corrected
and all health survey deficiencies were in process of being corrected.

(3) In October 1978, the State extended the provider agreement for 60
days, and in December 1978, a provider agreement was executed for the
period January 1, 1979 through June 30, 1979.

In January 1979, the State survey agency made an unannounced visit to
the provider and recommended to the Department of Public Welfare that
Crown be terminated from participation in the Medicaid program based on
the survey findings: 23 deficiencies in the facility's ability to meet
the standards for participation described in 42 CFR 405.1101 through
405.1137 still existed from the May and July survey, and four new
deficiences were found which related to the provision of nursing
services, control of infection, and physical environment. A federal
survey conducted in April 1979 documented continuing deficiencies in
meeting the standards applicable to the facility's governing body and
management, the provision of dental services, control of infection, and
physical environment.

In response to the federal survey report, the State conducted another
review of Crown in July 1979, and found that the previous deficiencies
in the governing body and managment of the facility had been corrected,
but that new or continuing deficiencies were found in the facility's
physical environment, in its governing body and management, in control
of infection, and in compliance with federal, state, and local laws.

Despite these findings, the State executed a provider agreement with
Crown on November 9, 1979 for July 1, 1979 to June 30, 1980 with an
automatic cancellation date of April 30, 1980. This provider agreement
appears to have been based on a Certification and Transmittal form
signed on line 19 by the survey agency on October 20, 1979 recommending
certification for a twelve month period starting on July 1, 1979. /1/


On May 23, 1980, the State issued an order to Crown informing the
facility that as of June 21, 1980, it would no longer receive payments
under the Medicaid program. On May 28, 1980, the facility requested an
administrative hearing pursuant to Pennsylvania law.

(4) The Agency's position was that FFP was unallowable from July 1979
through June 1980 because of (1) the repetition of deficiencies from one
year to the next without compliance with the requirements for
documentation of special circumstances (42 CFR 442.105); or,
alternatively (2) an unacceptable plan of correction which lacked
projected completion dates (42 CFR 442.111(b) or (c)), and which lacked
a finding by the survey agency that the health and safety of the
patients were not in jeopardy even if there were deficiencies (42 CFR
442.105(a)). While either basis would be sufficient to uphold the
disallowance, the Agency raised both bases before the Board.

For the period July 1980 through June 1981, the Agency argued that
FFP was unallowable because of the fact that the facility had not been
recertified after the provider agreement expired on June 30, 1979 (42
CFR 442.12(a)).

Discussion

1. Recertification of a Facility with Repeat Deficiencies

The main issue in the disallowance covering the period from July 1979
through June 1980 is whether the provider agreement for Crown was valid
in light of 42 CFR 442.105. /2/


The survey documents provided by the State for the July 1979 survey
show that the physical environment condition as well as other conditions
were marked as not being met. Both parties have stated that prior to
the execution of a November 1979 provider agreement, the survey
documents were "revised" so that all conditions were marked as being
met. Under its authority set forth in 42 CFR 442.30, the Agency claimed
that this revision was improper and that the 1979 certification was not
valid. To reiterate, the "look-behind" regulation provides in part that
a provider agreement is not valid evidence that a facility has met
Medicaid requirements if the Administrator determines that the survey
agency failed to carry out its duties in accordance with federal
regulations. The Agency asserted that the facility once again failed to
comply with the physical environment condition at the time of the 1979
certification.

(5) Indeed, the plan of correction itself states that correction
would take place only upon completion of the renovation program. The
facility's long-delayed renovation and construction did not commence
until October 1979 and was not scheduled to be completed until January
15, 1981. Agency Response, 81-69-PA-HC, p. 4 and Attachment A --
Construction Schedule.

The evidence in the record indicates that for several years, the
facility had not complied with Medicaid requirements for certification.
The State itself recognized this fact on survey reports, in memoranda to
the file and in communications with the facility. For example, see the
report of the July 1979 survey including standards on "patient rooms and
toilet facilities," "maintenance of equipment, building and grounds,"
and "other environmental considerations;" the report of a surveyor's
unannounced visit on January 4, 1980; and a letter from the Department
of Health to the facility dated May 12, 1980.

The State argued that while the facility had deficiencies, the
facility was in compliance with Medicaid standards, using as evidence
the surveyor's July 1979 report noting all the "conditions" as "met."

In making this argument, the State was attempting to draw a
distinction between major headings on a survey report ("conditions") and
subheadings ("standards" and "elements") and to suggest that it is not
necessary for each and every standard under a condition of participation
to be met for the condition to be in compliance. As support, the State
cited the Agency's own Provider Certification: State Operations Manual
(Manual).

The regulations speak in terms of repeat deficiencies, however, not
in terms of noncompliance with conditions, and the State has not
disputed the presence of such deficiencies. In addition, the standards
and elements relate to specific requirements for certification, while
the conditions are merely general categories of these requirements.

There were repeat deficiencies present at Crown. The record shows
that the State certified the facility despite these deficiencies. There
is no evidence that such certification was accompanied by the
documentation meeting the requirements set forth in 42 CFR 442.105(d);
therefore, the provider agreement and the certification upon which it
was based were invalid. /3/

(6) 2. Recertification of a Facility with New Deficiencies

While our decision regarding the presence of repeat deficiencies is
dispositive for the period from July 1979 through June 1980, we will
also briefly discuss the Agency's alternative basis for the
disallowance.

The Agency stated that the plan of correction executed by the State
and Crown was not acceptable because (1) it did not include projected
completion dates, (2) the survey agency did not maintain a written
justification of a finding that the deficiencies did not jeopardize the
patients' health and safety nor seriously limit the facility's capacity
to give adequate care, and (3) a plan of correction does not cure repeat
deficiencies.

The State argued that the plan of correction did include projected
completion dates and that the survey and records of the survey agency
(7) included sufficient data to justify a finding that the patients'
health and safety were not in jeopardy. As evidence, the State pointed
to the July 1979 survey report which found that all conditions of
participation were met and a letter dated April 15, 1981 from the survey
agency.

The State also argued that the Manual says that the survey agency may
properly find a condition met without regard to the provisions of 42 CFR
442.105 and indicates no requirement as to how a state maintains
justification for a finding that the patients' health and safety are not
in danger. The State asserted that the Manual "directs the survey
agency only to a significant deficiency" (State's letter to Board dated
September 9, 1981, p. 2.), and that the Agency has not shown that the
survey agency did not adequately document that the facility was
providing adequate care. The State asserted that the Manual does not
require completion dates on a plan of correction.

The State's arguments pertaining to this Manual do not have merit.
According to the State, "(the) survey agency may properly find a
condition met, according to the Manual, without regard to the provisions
of 42 CFR 442.105." Letter to Board dated September 9, 1981, page 2.
The Manual does not say that if conditions have been marked as unmet,
recertification can take place the next year with the same conditions
marked unmet. Therefore, it does no contradict 442.105. The State's
arguments regarding the necessity of completion dates on a plan of
correction are based on a false assumption. Section 2340 of the Manual
mentions completion dates as a part of a plan of correction whenever it
refers to plans of correction. /4/


In addition, the regulations state that in order to certify a
facility with deficiencies, the State must maintain written
justification of a finding that the deficiencies did not jeopardize the
patients' health and safety. 42 CFR 442.105(a). The State argued that
the surveys and records included sufficient data to indicate that there
was no jeopardy. The examples of deficiencies cited by the State in its
appeal indicated the opposite; the surveyors found serious
deficiencies. For example, on page 9 of the survey report provided by
the State, marginal notes state that "the following conditions
jeopardize the safety of the patients. . . ." Page 2 of the report
mentions "serious" continuing deficiencies in the physical environment
and housekeeping areas. The State may be correct that the HCFA Manual
does not give any guidance as to the justification necessary. But the
regulation (8) is clear that written justification must be maintained.
The State asks us to accept implications from the State's certification
of the facility, but the underlying surveys undermine the validity of
the certification.

The Agency properly applied "look-behind" to find that the 1979-80
provider agreement was not valid because the State certified the
facility in contravention of federal regulations. Therefore, the
provider agreement for the period 1979-80 was not valid because of the
repeat deficiencies and because new deficiencies were not dealt with
properly in accordance with the regulations.

3. Lack of Certification

According to the notification of disallowance in 81-145-PA-HC,

The last valid (provider agreement) executed by the single State
agency with the Crown Nursing Home expired on June 30, 1979, and it has
not been recertified. Since the FFP claimed on the cited expenditure
reports was for services rendered from June through October 1980 when
the facility had not been recertified . . . FFP is not allowable as
specified in (42 CFR 442.12(a)).

The notification of disallowance in 82-13-PA-HC stated that the
facility had not been recertified at any time during the period from
November 1980 through June 1981. The State has not provided any
evidence of certification for June 1980 through June 1981 and appears to
be basing its appeal on the fact that there was a provider appeal
pending. This issue will be discussed below.

4. The Effect of Crown's Appeal of the State's Notice of Termination

The Board has interpreted the Agency's regulations in light of
MSA-PRG-11 to require FFP during the pendency of an appeal. /5/ FFP is
(9)only available for a maximum of 12 months after the expiration of the
term of the last valid provider agreement. See, e.g. Ohio Department of
Public Welfare, Decision No. 173, April 30, 1981.


Documentation provided by the State shows that the State notified
Crown on May 23, 1980 that no Medicaid payments would be forthcoming as
of June 21, 1980. On May 28, 1980, the facility requested an
administrative hearing. The documentation does not indicate whether the
administrative process has been completed yet although the State says
that "(in) August, 1981, this appeal became moot because the facility
was certified by the state survey agency." Application for Review,
81-145-PA-HC.

The State argued that since the facility appealed the proposed
termination of its provider agreement under Pennsylvania administrative
law, these cases should be decided in light of the Board's decision in
Pennsylvania Department of Public Welfare, Decision No. 217, September
30, 1981 and FFP should be allowable during the pendency of the appeal.

Based on our prior analysis of Pennsylvania law (see discussion in
Decision No. 217), we start from the premise that Pennsylvania law meets
the requirement of a State law for the purposes of the first exception
set forth in PRG-11.

The Agency argued that:

PRG-11 is inapplicable in this case in view of the Board's proposed
finding that these appeals involve the Agency's appropriate use of the
'look-behind' provision. Under the 'look-behind', the provider
agreement covering the July 1, 1979 through June 30, 1980 period was
void ab initio. . . In summary, the Agency contends that PRG-11 cannot
properly be used to breathe life into a stillborn provider agreement.

Agency Response to Order to Show Cause, pp. 2, 3.

The facts of this case as enumerated by the Agency (and
uncontroverted by the State) indicate that not only was the provider
agreement executed for the period July 1, 1979 to June 30, 1980 invalid
(as discussed above), but also because of repeat deficiencies, the
provider agreement for the prior period was invalid. The evidence shows
that the facility's first provider agreement, executed in November 1977,
indicated that deficiencies would have to be corrected before another
provider agreement would be executed. Although surveys conducted in
1978 indicated that there were repeat deficiencies, the State executed a
provider agreement for the period January 1, 1979 through June 30, 1979.
There is no (10) indication in the record that the facts leading to this
provider agreement were significantly different from those analyzed in
the first part of our discussion. This provider agreement therefore
suffers from the same fatal defects. There was no appeal by the facility
until May 28, 1980, almost 18 months after the expiration of term of the
last valid provider agreement. Since there was no appeal pending within
twelve months of the term of the last valid provider agreement, there is
no basis for FFP during the pendency of the appeal.

Conclusion

For the reasons stated above, we sustain the disallowances. /1/
Although it has not been raised as an issue in these appeals,
the Board has decided (see, e.g., Washington Department of Social and
Health Services, Decision No. 176, May 26, 1981) that the date of the
signature on line 19 of the Certification and Transmittal form is
presumptively the best evidence of the date a certification
determination was made. The effective date of a provider agreement may
not be earlier than the date of certification. 42 CFR 442.12(b). /2/
Early in the appeal, the State contended that the Agency's
argument with regard to 442.105 should be stricken since it was not
mentioned in the notification of disallowance. We rejected the State's
contention in our Order to Show Cause (p. 5), and the State has not
pursued it. /3/ The Agency in its notification of disallowance
for 81-145-PA-HC (repeated in 82-13-PA-HC) stated that the provider
agreement that expired on June 30, 1979 was valid. The Board asked in
the Order why the Agency stated that this agreement was valid in light
of the Agency's seeming concern about repeat deficiencies and its
argument that there were repeat deficiencies starting in 1978. The
Agency pleaded technical error and argued that, in addition, its
statements in the notifications of disallowances were irrelevant since
the disallowances were for services rendered after June 30, 1979. The
State argued that the statement was highly relevant because: the Agency
should not now place all on the burden for FYE June 30, 1980 on DPW
where the Agency itself has accepted as valid DPW's reliance of the
Department of Health's certification of Crown in circumstances which the
Agency itself argues were similar in the prior year. Reply to Agency
Response to Order to Show Cause, p. 3. As will be discussed on pages 8
through 10, based on the relevant facts, the Board finds that the
provider agreement for the period January 1, 1979 through June 30, 1979
was not valid because of the presence of repeat deficiencies and
improper certification in the face of such deficiencies. That the
Agency has not taken a disallowance for this period is not determinative
of the issue of whether or not this provider agreement was valid. The
validity of that agreement is pertinent to the issue of FFP during the
time period when the facility was appealing the proposed termination of
its Medicaid participation and as such, was considered by the Board in
these appeals. /4/ Indeed, the plan of correction present in the
record appears to note completion dates or could be viewed as
incorporating them by referring to the construction schedule. But this
fact alone does not cure the other problems with the State's
recertification efforts. /5/ MSA-PRG-11 (PRG-11), a December
1971 Program Regulation Guide issued by the predecessor to HCFA, sets
forth the basic rule that FFP is not available if a facility does not
have a currently effective provider agreement, but notes two exceptions:
1) (If) State law provides for continued validity of the provider
agreement pending appeal; or 2) (If) the facility is upheld on appeal
and State law provides for retroactive reinstatement of the agreement.

OCTOBER 22, 1983