Florida Department of Health and Rehabilitative Services, DAB No. 414 (1983)

GAB Decision 414
Docket No. 83-108

July 22, 1983

Florida Department of Health and Rehabilitative Services;
Settle, Norval; Teitz, Alexander Garrett, Donald


RULING ON REQUEST FOR RECONSIDERATION

In Florida Department of Health and Rehabilitative Services, the
Board reversed a decision by the Office of Human Development Services
disallowing federal financial participation (FFP) claimed under Title XX
of the Social Security Act for social services provided to residents of
Florida institutions for the mentally ill and mentally retarded. The
Board held that the services were not provided by staff of the
facilities and were not activities intrinsic to the purposes of the
facilities, and, therefore, the claims did not violate Agency
regulations found at 45 CFR 228.44.

The Agency received the Board's decision on May 13, 1983, and by
motion dated May 27, 1983, requested that the Board reconsider the
decision en banc. As grounds for its motion, the Agency alleged that
"the Board overlooked and failed to consider material facts, and
overlooked and failed to apply pertinent provisions of law." Motion, p.
1. The State was provided an opportunity to comment on the request and
opposed the motion on the grounds that the Agency had failed to identify
any error of law or fact and was simply attempting to relitigate issues
already decided.

Under the Board's rules at 45 CFR Part 16, the Board has the power to
reconsider a Board decision "where a party promptly alleges a clear
error of fact or law." 45 CFR 16.13. When a party submits a request for
reconsideration in a timely manner, as here, the Board must first
examine the allegations made to determine whether reconsideration of the
substantive issues in the case is warranted. Here, we conclude that the
Agency allegations are simply incorrect. The Board did not overlook or
fail to consider any material fact, but simply disagreed with the Agency
as to what the facts were and how they should be viewed. Similarly, the
Board applied all pertinent provisions of the law, concluding that the
Agency had misinterpreted Florida law and had applied its own regulation
in a manner inconsistent with its own published interpretation and the
underlying statute. Contrary to the Agency's assertions, the Board did
not disregard Agency expertise or any longstanding administrative
interpretation of the regulations. Accordingly, for these reasons,
developed more fully below, we deny the Agency's motion.

(2) I. Summary of Decision No. 414

In 1975 and 1976, as part of its implementation of Title XX of the
Social Security Act, the State developed a method of delivering social
services to residents of mental health and mental retardation facilities
though a program of "in-reach" services described in the State's
services plan. These services were provided by social service workers,
assigned to the facilities, who had previously reported to the facility
heads. In reorganizing its Department of Health and Rehabilitative
Services (DHR), the State placed these social service workers under a
Social Services Director and placed staff providing services such as
basic care of the residents, administrative services, and maintenance of
the facility and grounds under a facility Superintendent. Both the
Social Services Director and the Superintendent ultiately reported to a
District Administrator, who had line authority over DHR programs and
institutions in one of eleven districts in the State. In the 1970's,
the State had also amended its statutes to describe its mental
retardation institutions generally as facilities for the habilitation of
the mentally retarded and to provide that residents of mental health
institutions should receive medical, vocational, social, educational,
and rehabilitative services required to bring about an early return of
the resident to the community. Other State laws reflected the State's
system of service delivery, under which responsibility for prescribed
services to particular categories of clients (such as the mentally
retarded) was placed with DHR and institutions in which these clients
resided were merely considered one "locus of care" in which the services
were provided.

The Agency disallowed all of the State's claims for in-reach services
provided by social workers assigned to the facilities during the period
January 1, 1976 through September 30, 1980. The disallowance was based
on an audit report which found: 1) that the workers were staff of the
facilities; and 2) that the services were activities intrinsic to the
purposes of the facilities, as determined by State law. Either finding
is an independent ground for disallowance under 45 CFR 228.44
(1976-1980), an Agency regulation based on section 2002(a)(11) of the
Social Security Act. That section prohibits payment of Title XX funds
for services to residents of certain institutions, unless specific
requirements are met.

In Decision No. 414, the Board reversed the Agency disallowance.
With regard to the question of whether the social services workers were
staff of the facility, the Board followed a policy ruling, issued by the
Agency in 1977. The Board found that the ruling interpreted the
requirement as applied to the State's social workers, finding that they
were not staff of the facilities even though the workers were assigned
to the facilities and the District Administrator had line authority over
them and the Superintendent. The Board further concluded that, in any
event, the application of the regulation advocated by the respondent was
not warranted by the plain language of the regulation. In reaching
these (3) conclusions, the Board made findings of fact concerning the
role of the District Administrator, disagreeing with the Agency's view
that the District Administrator had control of the daily activities of
the institution, functioning as a "de facto" supervisor of the facility.

The Board also concluded that the services provided were not
activities intrinsic to the purposes of the facilities, under a proper
interpretation of Florida law.The Agency conclusions were based on the
general statutory descriptions of the types of services institutional
residents would receive. The Board determined that the Agency did not
consider Florida law as a whole, nor sufficiently relate that law to the
specific services identified as in-reach services. The Board further
concluded that the Agency had applied the "intrinsic activities"
requirement in a manner inconsistnt with the statute and with the
preamble to the regulation containing the requirement. Based on these
conclusions, the Board reversed the disallowance.

In the sections below, we discuss each of the Agency allegations
concerning why the Board's decision was wrong. We address the
allegations related to the "intrinsic activities" requirement before the
the allegations related to the "staff of the facility" requirement
because the Agency addressed the issues in that order in its motion.

II. The Intrinsic Activities Requirement

The "intrinsic activities" requirement, as revised January 1, 1977,
denies FFP for activities that are intrinsic to the purpose of a
facility "as determined by facility charter, State law or standards,
relevant licensing or certification requirements, or Federal or State
court decisions." 45 CFR 228.44(b)(2), 42 Fed. Reg. 4842. Under Florida
law, as interpreted by the State itself, DHR had the responsibility for
providing social services to all clients in a particular category (such
as the mentally retarded), regardless of where they lived. According to
the State, the State law provisions relied on by the Agency for the
disallowance were properly viewed as statements of what the clients
would receive from DHR (when funding became available), not as
requirements placed on the institutions themselves. For the reasons
stated in the decision at pages 17 to 21, the Board agreed with the
State's interpretation, concluding that under Florida law only custodial
care and protective supervision were activities intrinsic to the
purposes of the facilities.

The Board further concluded that the intrinsic activities requirement
did not apply to preclude FFP where State law did not require that the
facility provide specific social services but placed that responsibility
on a state agency, merely stating generally the types of services the
institutional residents would receive. This conclusion was based on an
interpretation of the regulation derived from its plain wording, which
refers to the purpose of the facility, not to the duties of the State in
general. Nothing in the regulation or in any Agency issuance prior to
the disallowance suggests a contrary interpretation.

(4) The Agency's assertion now that it is immaterial that the
institutions themselves were not required to render the services,
Motion, p. 8, note 4, contradicts the Agency's own explanation of how
the "intrinsic activities" requirement implements the statute. In its
initial brief, the Agency explained that the regulation sets forth
standards for determining whether a service is actually a bona-fide
"in-reach" service or "whether the institution, through an otherwise
meaningless subterfuge, is actually rendering the service itself."
Respondent's Brief, p. 8. The Agency further stated that "the
regulation makes clear that when an institution is charged with the
responsibility for providing a service, under law or its own charter,
then that service cannot be the subject of a bona-fide 'in-reach'
program." Brief, p. 9.

Nonetheless, the Agency alleged in its motion that the Board had
"disregarded a long-standing, publicly stated, reasonable interpretation
of the regulation by Respondent and substituted instead the Board's own
judgment of another interpretation, which the Board found also to be
reasonable." Motion, p. 4. In support of this allegation, the Agency
merely quoted the portion of the regulation added in 1977 and stated
that its letter to the State dated February 11, 1977, "clearly and
explicitly advised Appellant that if social services were required to
meet these standards then those services would not qualify for FFP...."
Motion, p. 6.

The 1977 letter does not address the specific question of the effect
of a state law which describes generally what types of services an
institutional resident should receive, rather than placing the
responsibility on the institution itself for providing services. The
language referred to by the Agency regarding social services which are
"required to meet standards" appears in the following context:

We have only considered the effect of State law as presented in your
material. If your hospitals and institutions are licensed or certified
for Title XIX or for membership in national organizations such as the
American Hospital Association, any social services required to meet
those licensing or certification standards would be considered intrinsic
to the facility and therefore not allowance for FFP.

Appeal File, Tab 14.

In this disallowance, the Agency did not rely generally on licensing
or certification standards, however. * Thus, it appears that the (5)
Agency allegation is that this statement means that, if social services
are required to meet State law, FFP is not available. This meaning is
not at all "clear and explicit" from the letter as the Agency contended.
Indeed, we think that the meaning cannot even be fairly implied from the
letter. There is a critical difference between prescribed standards
which a facility must meet in order to be licensed or certified and a
state law which describes generally the types of services certain
individuals will receive, without requiring the facility itself to
provide any specific service. More importantly, the interpretation
which the Agency seems to perceive in the letter would be a strained
reading of the regulation, which refers to state law and standards in
the context of determining what activities are intrinsic to the purpose
of a facility. The regulation is not an overall prohibition on funding
of any social service provided pursuant to a state or other requirement.
Thus, we disagree with the Agency that the 1977 letter clearly and
explicitly advised the State of an interpretation which would render
unallowable the costs of the State's in-reach services.


Since the Agency has not identified any longstanding interpretation
of the regulation contrary to the interpretation applied by the Board in
its decision, the Agency allegation that the Board disregarded such an
interpretation is simply incorrect.

The Agency allegation is also erroneous in suggesting that the Board
merely substituted its own interpretation of the regulation for an
Agency interpretation in the disallowance decision that was also
reasonable. The Board found that the Agency disallowance was based on
an improper interpretation of State law. Moreover, the Board concluded
that the Agency's application of the "intrinsic activities" requirement
to the kinds of social services involved here (which were designed to
promote deinstitutionalization of the residents), based merely on
general purpose statements in Florida law, was too broad in view of the
intent behind the statutory provision the regulation implemented. The
Board also concluded the disallowance was inconsistent with a statement
in the preamble to the original version of the regulation. While the
Board did not specifically decide that the Agency's interpretation in
the disallowance was unreasonable, that conclusion is implied from the
Board's analysis.

(6) We appreciate the Agency's concern that the Board grant
appropriate recognition to Agency expertise, but this is simply not a
case where the Board failed to accord proper deference to an Agency
interpretation. The Board's decision was based primarily on the
conclusion that the Agency had misinterpreted State law. In
interpreting state law, the principle of deference to an agency would
not apply. The Agency certainly has expertise in social services and
how they are designed to accomplish certain goals, but we do not think
that this disallowance involved this type of judgment. Indeed, one of
the defects which the Board fund in the disallowance was that the Agency
had failed to specify how the particular in-reach services covered in
the State's services plan related to the State laws relied on by the
Agency. Moreover, the State provided evidence that its services were
directed to the goal of deinstitutionalization and the Agency did not
dispute this either during prior Board proceedings or in its motion.

The amount of deference due an Agency interpretation depends on the
circumstances, including whether the interpretation was previously
promulgated and, if so, in what manner. Here, the Agency did not show,
and still has not shown, that the disallowance was based on an
interpretation made prior to the disallowance letter.

The only formal interpretation by the Agency of the "intrinsic
activities" requirement is the statement in the preamble to the original
version of the requirement, published in the Federal Register in 1975.
The preamble explains the requirement as prhibiting financing for "those
functions which are the essential purpose of the institution's
existence." 40 Fed. Reg. 27353, June 27, 1975. The Board applied this
interpretation, finding the State's claim to be consistent with it. The
Agency itself adopted this reading of the requirement in the
disallowance letter, quoting from the audit finding that "the costs of
these activities were related to the essential purpose for which the
facilities were established." Appeal File, Tab 19, quoting Audit Report,
p. 12. Yet, the Agency in its motion faulted the Board for applying
this interpretation, as though the Board had somehow fabricated it out
of thin air.

We think that this interpretation in the preamble is a valid one.
The later revision of the regulation was not meant as a substantive
change, and we think the interpretation is consistent with the wording
of the regulation. Although, as the Agency pointed out in its motion,
the term "intrinsic" in the regulation modifies "activities," not
"purpose," the Agency has not shown that, for the purposes of this
appeal, there is any relevant difference between activities intrinsic to
the purpose of a facility and activities which are related to the
essential purpose of a facility. Even if we were to agree with the
Agency on this point, however, it would not invalidate the Board's
decision. The Board used the preamble statement merely as support for
the fundamental conclusion that the State's in-reach services were not
activities intrinsic to the purposes of the facilities, as determined by
State law.

(7) The Agency further stated that "it seems erroneous" to view
custodial care and protective supervision as the only essential function
of Florida's institutions, in view of the State's description of how DHR
expanded its mission to create institutions for treatment, habilitation
and care. Motion, p. 7. This view is based on the Agency's own
continued misperception that a requirement that DHR must provide
services to institutional residents converts those services to functions
of the institution. As we found in our decision, during the time period
involved here, DHR had the responsibility for providing social services
to particular types of clients, such as the mentally retarded, and the
institutions were considered merely one "locus of care" in which these
clients might be found. The Agency's attempt to characterize the
situation differently remains undocumented. The State presented
testimony at the hearing on the "locus of care" concept and the Agency
did not present anything to rebut that testimony, either then or now.

Finally, the Agency alleged that a conclusion that in Florida only
custodial care and protective supervision are intrinsic activities
renders the "intrinsic activities" requirement coextensive with a
companion requirement, and, therefore, of no effect. The companion
requirement denies FFP for activities which are the "inherent
responsibilities" of a facility, such as food, clothing, shelter,
general supervision and personal care. See, 45 CFR 228.44(b)(1).

This allegation misses the point. The conclusion as to what
activities are intrinsic to Florida's institutions is derived from an
application of Florida law, as required by the regulation. In a
different state, there might be activities which are not "inherent
responsibilities" of an institution but which are intrinsic to the
purpose of the institution under that state's laws. Thus, the Board's
conclusion does not render the requirement meaningless.

In summary, we conclude that the Board did not err in interpreting
the "intrinsic activities" requirement, or in determining any of the
underlying facts.

II. The "Staff of the Facility" Requirement

With respect to the "staff of the facility" requirement, the Board
followed an Agency letter, issued in 1977, which found that the State's
social workers providing in-reach services were "clearly not staff of
the facility." The Board decided to follow the ruling because it was
based on an accurate understanding of the relevant facts concerning the
State's reorganization of DHR, the assignment of social workers to
facilities which had previously employed them, and the role of the
District Administrator in the State's system.

In its motion, the Agency alleged that the Board made a mistake in
treating the 1977 letter "as a 'policy statement' approving the Florida
'in-reach' program as it may have existed on that date and as it later
(8) developed, notwithstanding clear and precise language which limited
its approval to a much different program described in two identified
documents." Motion, p. 4. The Agency further alleged that the Board
"failed to consider significant facts concerning the duties,
responsibilities, and organizational relationship of the social service
delivery staff and the District Administrator." We discuss each of these
allegations below.

A. The Board Did Not Disregard the Limiting Language in the Letter

The Agency alleged that the Board disregarded language in the 1977
letter limiting approval of Florida's organization of its social
services delivery system to approval of the system as described in a May
1976 letter and a State issue paper.

This simply is not so. Although the Board disagreed with the Agency
that the ruling was in fact so limited (particularly since the
memorandum from the Commissioner was clearly based on greater knowledge
of Florida's system), the Board explicitly determined that there was no
relevant difference between the description of the system in the two
documents mentioned and the system as we found it to be.

We discussed at page 10 of the decision how the May 1976 letter made
the Regional Commissioner aware of the relevant facts regarding the
State's organization and the social service workers. While we mentioned
a July 1976 memorandum from the Regional Commissioner to the
Commissioner, we stated that it was not necessary to our conclusion to
consider that letter. In a section about whether it was critical that
the workers provide services in the community as well as the
institution, we did discuss other evidence but we did this solely
because the Agency itself had introduced testimony on this point. We
only went outside the scope of the two documents identified in the 1977
letter to address points raised by the Agency outside the scope of those
letters.

Thus, contrary to the Agency's allegation, the Board did not
disregard the limitation in the 1977 letter but determined that, whether
the limit applied or not, the letter constituted approval of the system
as it existed during the disallowance period.

B. The Board Did Not Fail To Consider Significant Facts

In support of its allegation that the Board failed to consider
significant facts, the Agency stated that the situation uncovered by the
auditors was different from that portrayed in the documents on which the
policy ruling was based, because of subsequent developments in how
Florida operated its program.

(9) The general problem with this allegation is that it confuses the
auditors' findings with the facts. The Board's conclusion that the
State's description in the documents was accurate was based on the
Board's own findings of fact, which did not correspond in every respect
to the auditors' findings. The Board findings were supported by
documentary evidence and testimony provided by the State. It is
somewhat surprising that the Agency would attempt at this point to
dispute that evidence since the Agency did not dispute it at the
hearing. Indeed, one auditor was present at the hearing and the Agency
declined to put him on the witness stand. The Board will normally give
some presumption of validity to findings in an audit report in view of
the nature of the audit function. But the Board cannot give undue
weight to audit findings which are contradicted by undisputed testimony
and documentary evidence, as here.

There are also several other ways in which the Agency allegation is
incorrect. The Agency alleged that the auditors found that under the
State's reorganization the same workers who had previously worked in the
institutions continued to work in the institutions, providing social
services exclusively to institutional residents. The Board did not
ignore these factors, however, but found that the Regional Commissioner
was made aware of the circumstances surrounding the reassignment by the
May 1976 letter. Decision No. 414, p. 10. We found that the Regional
Commissioner was also aware of the fact that not all workers would
provide services to both community and institutional residents, but from
different sources than the documents mentioned in the 1977 letter. That
this may not have been clear from the State's documents is not
significant here, however, in view of our conclusion that the Agency
simply failed to show that this was a critical factor in determining
whether the staff of the facility requirement was met. See, Decision
No. 414, pp.11-12. Nothing in the regulation itself states, or even
implies, that this is a factor. Moreover, the program specialist who
testified as a witness for the Agency could state no programmatic reason
why workers should provide services to both institutional and community
residents. The Agency still has not come forward with any reason why
failure to do so renders the workers staff of the facilities.

The Agency also alleged that the auditors found that "the duties and
responsibilities of the former position of institution superintendent
for operation of the facility, as well as service delivery, were now
vested in and exercised by the District Administrator, and that in fact
the District Administrator in addition to his other duties was
functioning as an off-site facility administrator." Motion, p. 14. The
Agency did not cite to the Audit Report for this statement, and we can
locate no such finding in the Audit Report. In any event, the Board did
thoroughly consider what the record showed about the role of the
District Administrator and simply found that the Agency was incorrect
that the District Administrator functioned as a de facto supervisor of
the facility.

(10) Another difficulty with the Agency's position is that it
confuses what are facts as found by the auditors with determinations
which the auditors made based on those facts. Some of the "findings"
cited by the Agency are conclusions applying the regulation to the facts
as the auditors saw them. The auditors themselves recognized their
limited role in this area and sought advice from the Office of the
General Counsel on how the legal requirements applied to the facts. As
noted in the decision, the description on which the legal advice was
based simplified the State's system in a way which did not comport with
the facts as we found them.

Thus, the Agency allegation that the Board failed to consider
significant facts is incorrect, and is based on the Agency's own
misunderstanding of what the facts were and how the law applied to them.

Therefore, we conclude that the Board did not err in following the
1977 policy ruling, or in finding the facts on which our conclusion was
based.

Conclusion

The Agency raised in its motion several serious allegations about the
Board's decision. However, these allegations were based on a
misunderstanding, if not misrepresentation, of what that decision found
and the basis for the Board's conclusions. Accordingly, we deny the
Agency's motion to reconsider Decision No. 414. * While the Agency did
briefly cite to certification standards for several intermediate care
facilities for the mentally retarded (ICF/ MRs), funded under Title XIX
of the Social Security Act, it is not clear if those standards require
that the ICF/MR itself provide the in-reach services here. Although we
sought guidance from the Agency in how these ICF/MR requirements applied
to the State's in-reach services, the Agency did not then provide it,
nor has the Agency provided it in its reconsideration motion. As noted
in the decision, there is also a question as to whether disallowing
these costs would affect the amount of Title XX funding the State might
be required to reimburse. Decision No. 414, note 17. The Agency did
not contend in its motion that the Board needed to address this issue
further.

JULY 07, 1984