GAB Decision 306
May 28, 1982 Ohio Department of Public Welfare; Docket No. 81-158-OH-HC
Ford, Cecilia; Settle, Norval Teitz, Alexander
The Ohio Department of Public Welfare (State) appealed the
disallowance by the Health Care Financing Administration (HCFA, Agency)
of $3,950,629 in federal financial participation (FFP) claimed under
title XIX of the Social Security Act (Medicaid). HCFA disallowed the
federal share of payments made to five nursing homes for intermediate
care facility (ICF) services rendered during the period July 1, 1977
through June 30, 1980. The basis stated for the disallowance was that
the nursing homes had not been certified as ICF facilities during all or
part of the period and did not have provider agreements with the State.
The major issues presented are: whether the State, in order to
receive FFP, must independently certify for ICF Medicaid participation a
facility which is also providing skilled nursing facility (SNF) services
in the Medicare and Medicaid programs; and whether the State is
entitled to FFP during the period in which a facility is appealing the
nonrenewal of its Medicaid certification. For reasons stated below, we
find that the State must make its own ICF certification of a nursing
facility participating in both the Medicare and Medicaid programs, and
that the State should not receive FFP for facilities which did not have
appeals pending within 12 months of the expiration of their last
Medicaid certification. We therefore sustain the disallowance.
There are no material issues of fact in dispute. We have determined,
therefore, to proceed to decision based on the State's appeal brief and
the Agency's response. The State was given the opportunity to submit a
reply brief, pursuant to 45 CFR 16.8(c), but did not do so.
Factual Background
An Agency review of the State's Medicaid nursing home program
disclosed that five nursing facilities did not have effective provider
agreements and were not certified by the State survey agency for ICF
services during all or some part of the period July 1, 1977 through June
30, 1980. /1/ All of the facilities had previously been dually certified
to render SNF (2) services under the Medicare and Medicaid programs, as
well as ICF services under Medicaid. The detailed background of each of
the facilities is as follows:
1. Imperial Home's ICF provider agreement expired on June 30, 1977.
The Agency, on April 3, 1981, gave retroactive certification for SNF
services from May 30, 1978 until April 30, 1981. There is nothing in
the record, however, to indicate that an ICF certification was issued
for the facility after the prior ICF certification expired on June 30,
1977. FFP in the amount of $842,368 was disallowed for the period July
1, 1977 until May 31, 1980.
2. Colonial Manor's ICF provider agreement expired on December 31,
1977. On January 11, 1979 the facility obtained a temporary restraining
order from a State court directing the State to continue Medicaid
payments to the facility as of December 9, 1978. On May 2, 1979 the
State survey agency recertified the facility for ICF services. FFP in
the amount of $330,412 for ICF services was disallowed for the period
January 1, 1978 until May 1, 1979.
3. Little Forest Medical Center's ICF provider agreement expired on
April 30, 1979. The State had not issued a new ICF provider agreement
as of May 31, 1980, the end of the review period. FFP in the amount of
$943,456 was disallowed for the period May 1, 1979 until May 31, 1980.
4. Chateau Fairlawn's ICF provider agreement expired on July 31,
1977. The State extended the ICF provider agreement for an additional
two-month period until September 30, 1977. On December 8, 1978 the
facility obtained a temporary restraining order directing the State to
continue Medicaid payments from that date. FFP in the amount of
$921,951 was disallowed for the period October 1, 1977 until May 31,
1980, the end of the Agency's review period.
5. Gillettes, The Country Place's ICF provider agreement expired on
June 30, 1977. On January 11, 1979 the facility obtained a temporary
restraining order directing the State to continue Medicaid payments as
of December 26, 1978. The State survey agency recertified the facility
for ICF services on April 16, 1979, but no new provider agreement was
executed. FFP in the amount of $912,442 was disallowed for the period
July 1, 1977 until April 16, 1979.
Parties' Arguments
The State questioned why the Agency had disallowed FFP for ICF
services at the five facilities after the Agency had approved the
State's claim for SNF Medicaid services at the same facilities when the
facilities did not have valid provider agreements with the State to
render SNF (3) services. The State argued that the Medicaid regulations
define two distinct categories of facilities: joint Medicare-Medicaid
facilities and Medicaid-only facilities. The State contended that "a
facility seeking dual certification for payment of both SNF and ICF
services would fall under the category of a joint Medicare-Medicaid
facility, and therefore any action of the state would be conditioned
upon the action of Medicare." (State's September 15, 1981 letter, p. 5)
According to the State, delays by the Agency's Health Standards and
Quality Bureau (HSQB) in recertifying the facilities for Medicare
participation caused the facilities to be without Medicaid ICF provider
agreements. The State contended that it was unaware of the
certification process for a facility which provided both Medicaid ICF
services and Medicare-Medicaid SNF services until the Agency's Regional
Division of Survey and Certification Operations (DSCO) issued, on March
3, 1980, its Program Memorandum No. 80-4. That memorandum stated:
Providers certified to provide both SNF and ICF services and
participate in both XVIII (Medicare) and XIX (Medicaid) require two
separate certification determinations; one for SNF and one for ICF.
The Regional Office has authority for only the SNF determination. The
State agency must determine compliance for the ICF.
The State argued that "it was due to this lack of technical direction
found in the . . . program memorandum that led to the (State's)
continuation of payment to the five nursing facilities under the
Medicaid program during the quarter ended September 30, 1977, through
June 30, 1980." (State's September 15, 1981 letter, p. 6) The State
additionally argued that it is entitled to FFP for the periods of time
that the State was directed by court order to continue Medicaid payments
to Colonial Manor, Chateau Fairlawn, and Gillettes, The Country Place.
In response, the Agency, citing Medicaid regulations and prior Board
decisions, argued that the State had the sole legal authority and
responsibility to certify a facility for Medicaid ICF services.
According to the Agency, "The fact that a facility may also be certified
to provide SNF Medicaid programs does not affect or diminish the State's
obligations for ICF requirements." (Agency Response, p. 6) As for the
State's request that FFP be available because of court orders for three
of the facilities, the Agency argued that the court orders were not
obtained until more than a full year had passed after the expiration of
the facilities' provider agreements. The Agency contended that a court
order cannot be given greater effect than a valid provider agreement and
that the State's failure to have an annual survey and certification for
the facilities was "legally fatal." (Agency Response, p. 8)
(4) Discussion
In its notification of disallowance HCFA specifically referred to two
prior Board decisions (Maryland Department of Health and Mental Hygiene,
Decision No. 113, July 31, 1980 and Ohio Department of Public Welfare,
Decision No. 173, April 20, 1981) which HCFA believed supported its
position why a disallowance was justified under the circumstances of
this case. The State failed to present any arguments, either in its
appeal letter or in its subsequent appeal brief, why these two Board
decisions were not applicable to this disallowance. In examining the
arguments raised by the State, we find nothing to persuade us that the
analysis contained in those decisions was erroneous or not relevant
here, and we therefore conclude that this disallowance should be
sustained.
The Necessity for State ICF Certification
The State's central position in this appeal is that, prior to the
March 3, 1980 DSCO Program Memorandum No. 80-4, the Medicaid regulations
were ambiguous as to whether a State was required to make a separate ICF
certification of a joint Medicare-Medicaid facility. As evidence of
this ambiguity concerning the certification-provider agreement process
for a facility providing both ICF and SNF services, the State pointed to
the Agency's action in disallowing ICF services but allowing SNF
services at a facility without any type of provider agreement.
Contrary to the State's assertions, the Medicaid regulations are
explicit in requiring an independent State certification of an ICF
provider, regardless of whether the provider is also a Medicare SNF
facility. The applicable regulations in effect at the start of the
review period are set forth at 45 CFR Part 249 (1976). Under these
regulations, to obtain FFP for payments made to an ICF, a state must
comply with the provisions of 45 CFR 249.10(b)(15)(i)(E) requiring the
single State agency and the provider facility to execute an agreement
which the single State agency determines is in accordance with 45 CFR
249.33 and meets all the conditions of 45 CFR 249.10(b)(15)(i). The
regulations require that prior to the execution of the provider
agreement and the making of payments, the agency designated pursuant to
section 250.100 (the survey agency) must certify that the facility meets
the definition in section 249.10(b)(15) and is in full compliance with
standards prescribed in the regulations (45 CFR 249.12 and 249.33(
a)(2)).
The intricacies of the ICF certification-provider agreement process
have been thoroughly examined by the Board in a series of decisions
involving the State of Maryland. In Maryland Department of Health and
Mental Hygiene, Decision No. 113, July 31, 1980, the State of (5)
Maryland argued, as Ohio did in this case, that the HSQB's failure to
expeditiously issue its SNF certification of a facility was responsible
for the lack of an ICF provider agreement with the facility. In
rejecting Maryland's argument, the Board focused on the cooperative
nature of the Medicaid program, a federal-state program which gives the
states considerable independence in administering their own Medicaid
programs. The Board noted that the responsibility for certifying an ICF
for Medicaid participation lies solely with the states. 45 CFR
249.33(a)(2). The Board found that there was no regulatory
authorization that a State delay issuing an ICF certification pending an
Agency determination on the facility's SNF status.
Contrary to the State's belief, DSCO Program Memorandum No. 80-4 was
not an announcement of a new Agency position on ICF certification, but
merely an explanation of the regulatory requirement that the State
survey agency has the sole responsibility for determining a facility's
compliance with ICF requirements, and hence its certifiability.
The State questioned the difference in treatment by the Agency of the
allowability of ICF and SNF services. The Board considered this
question in Maryland Department of Health and Mental Hygiene, Decision
No. 107, July 2, 1980. The Board there noted that regulatory
distinctions exist between ICFs and SNFs, reflecting the different
services provided at each type of facility. The Board stated that
because Agency certification is required for a joint Medicare-Medicaid
SNF, the Agency allows a Medicaid SNF provider agreement for a joint
facility to be backdated to the date of expiration of the facility's
last Medicare certification to protect a state from loss of Medicaid FFP
where there is a delay in the Agency's certification of the facility for
SNF services.
Thus, in this case the Agency approved FFP for the Medicaid SNF
services provided by the facilities, effective as of the date of the
facility's certification for the Medicare program. The underlying
rationale for this policy is that the primary requirement for the
payment of FFP in the Medicaid program is that a facility be certified
as meeting Medicaid standards and not that a provider agreement be
executed. A provider agreement can be executed retroactively, providing
that the facility has been certified. For the period covered by this
disallowance, the effective date of an ICF provider agreement was the
date of the facility's certification by the State survey agency. /2/
(6) It is for this reason that the Agency ceased disallowing ICF
payments at Colonial Manor and Gillettes once the State survey agency
certified them for ICF participation on May 2, 1979 and April 16, 1979
respectively. Even though the State did not actually execute ICF
provider agreements with those two facilities, the Agency recognized
that the State's certification of the facilities was sufficient to
qualify them for the Medicaid program.
In summary, then, we find that during the period in question the
regulations were clear in requiring that a state had the sole
responsibility for certifying a facility for ICF services, even though
that facility was also an SNF joint provider.
Availability of FFP During a Provider Appeal
Although the State did not argue the point extensively, an issue in
this case is whether the State is entitled to FFP during the periods it
was under court orders to continue Medicaid payments to Colonial Manor,
Chateau Fairlawn, and Gillettes. The question of whether a state should
receive FFP for services rendered by a facility which is appealing the
nonrenewal of its Medicaid certification has received exhaustive
treatment by the Board in a series of decisions.
In Ohio, supra, the Board interpreted the Agency's regulations in
light of MSA-PRG-11 to require FFP during the pendency of an appeal.
/3/
(7) The Board found that PRG-11 was still in effect and that "State
law" included an order by a state court. A timely appeal by a facility
had the effect of reviving its expired provider agreement. Ohio,
however, limited the availability of FFP to a maximum of 12 months after
the expiration of the term of the last valid provider agreement. This
limitation on FFP was confirmed in Pennsylvania Department of Public
Welfare, Decision No. 270, March 31, 1982, where the Board held that if
there was no appeal pending within 12 months of the last provider
agreement, the provider agreement could not be revived by a later appeal
and thus there is no basis for FFP during the pendency of any appeal.
In this case none of the facilities secured a court order within 12
months of the expiration of its last ICF provider agreement. As the
facilities thus did not seek a timely appeal of the State's nonrenewal
of their Medicaid certifications, we find, on the basis of Ohio, that
the State is not entitled to FFP for the periods covered by the court
orders.
Conclusion
For the reasons stated above, we sustain the disallowance in the full
amount of $3,950,629. /1/ The review period ended with the May 1980
services that were paid in June and claimed on the June 30, 1980
quarterly report HCFA-64. /2/ In order to have Medicaid conform
with Medicare policy concerning the effective date of a provider
agreement, HCFA issued new regulations on April 4, 1980 (45 Fed. Reg.
22933). Under the new rule, 42 CFR 442.13, the effective date a state
Medicaid agency enters into a provider agreement may be earlier than the
date of certification. If all federal requirements are met on the date
of the onsite survey, the agreement must be effective on the date the
onsite survey is completed, for a new certification. 442.13(b). If all
federal requirements are not met on the date of the survey, the
agreement must be effective on the date the provider meets all
requirements, or the date the provider submits a plan of correction
acceptable to the State survey agency or an approvable waiver request,
whichever date comes earlier. 442.12(c). There is nothing in the new
regulation to indicate that it was intended to be retroactive. /3/
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