GAB Decision 504
Docket No. 83-78
January 31, 1984
Mississippi Medicaid Commission;
Garrett, Donald; Teitz, Alexander Ford, Cecilia Sparks
The Mississippi Medicaid Commission (Mississippi, State) appealed a
$156,990 disallowance by the Health Care Financing Administration (HCFA,
Agency) of federal financial participation (FFP) in the cost of services
to Medicaid recipients claimed under Title XIX of the Social Security
Act. The services were provided by the Hotel Reed Nursing Center (Hotel
Reed), a dual (skilled nursing and intermediate care) facility, during
the period June 1 to September 27, 1982.
The principal issue in this case is whether the provider agreement
issued by the State on July 2, 1982, was valid. We find that the
certification on which the provider agreement was based was improper
(and thus the provider agreement was invalid) because the survey agency
found the facility to be out of compliance with nine of 18 conditions
which it was required to meet as a Medicaid provider. Our decision to
uphold the disallowance is based on the record which includes the
transcript of a hearing held in Bay St. Louis, Mississippi, on November
21-22, 1983.
Background
During the period in question, Title XIX of the Social Security Act
authorized FFP in payments by Mississippi to skilled nursing and
intermediate care facilities (providers) which the State survey agency,
the Mississippi Health Care Commission, determined to have met the
requirements for participation in the Medicaid program (certification).
In addition, the single State agency charged with the administration of
the program, the Mississippi Medicaid Commission, had to have executed
an agreement with the provider (provider agreement). See 42 U.S.C.
1396a (19), (26), (27), (31), (36) and implementing regulations 42 CFR
Part 442 (1981). /1/
In this case, the survey agency certified the provider on May 31,
1982. On July 2, 1982, the single State agency executed a provider
agreement effective June 1, 1982.
(2) Subsequently, HCFA determined that the certification was based on
an inspection in which the survey agency found the facility to be out of
compliance with nine of 18 conditions of participation.
Under 42 CFR 442.30, a provider agreement is invalid if the
Administrator of HCFA (or her designate) determines that
(2) the survey agency failed to follow the rules and procedures for
certification . . .
Upon examination of the report of the pre-certification inspection
conducted by the survey agency on May 11-12, 1982, and the State's
response to HCFA's inquiry of August 25, 1982, the Agency determined
that the facility had not been properly certified between June 1 and
September 27, 1982. The Agency concluded that the provider agreement
was not valid and the State was not entitled to FFP in payments to the
facility during that period.
At HCFA's request, the survey agency conducted another inspection of
the facility on September 27, 1982, and found it to be in compliance
with all 18 conditions.
History
State officials testified to a history of problems with this facility
since 1976. Under different ownership and then known as Gulf View
Haven, the facility was terminated from the Medicaid program in 1976 and
1979. Each time it was recertified, although after the 1976 termination
it did not regain its status as a skilled nursing facility and those
patients requiring skilled nursing care were transferred. Transcript of
November 21-22, 1983 Hearing (Tr.) pp. 209-211. /2/ Following a
full-scale survey in September 1981, the State began another termination
action. While this was pending, the owner put it up for sale and also
began proceedings in bankruptcy. Tr. 212-214.
During this time staff from the Medicaid Commission visited Gulf View
Haven in December 1981 and found the patients in a "very deplorable
condition." Tr. 171. By February 1982, the situation at Gulf View Haven
had become "desperate." Tr. 217.
(3) The bankruptcy judge ordered the owner and his family out of the
building and appointed an oversight committee. Tr. 218. /3/
The oversight committee, which included the survey agency official in
charge of Medicaid certification, persuaded the present owner to take
over as interim manager in February 1982. /4/ Tr. 219. Shortly after
that he became the owner. The transition was "very complicated" and
the
new owner "had a lot of work to do." Tr. 220. He applied to the survey
agency for an emergency certificate of need so that he could begin
needed capital improvements, but the survey agency did not give him that
certificate until April 26, 1982.
The Medicaid certification which had been issued provisionally was
due to expire May 31, so the survey agency conducted an inspection on
May 11-12, 1982. The survey team, which had inspected the facility when
it was Gulf View Haven, was not surprised to find conditions out of
compliance "because it just (could not) be turned around that quickly."
Tr. 226. The survey agency knew it could not validly certify with any
condition out of compliance, but felt it could not refuse to certify
after it had "instigated and sort of been with them all this time to
effect some change for the good" and it had "confidence and faith
in the
new operator." Tr. 229, 230. The survey agency certified the facility
on May 31 based on a plan of correction.
Analysis
1. The State survey agency could not validly certify Hotel Reed with
one or more conditions out of compliance.
The State contended that one reason its certification of, and
consequent execution of a provider agreement with, Hotel Reed was proper
was that Hotel Reed had furnished an acceptable plan of correction.
Following the May 11-12, 1982 survey showing nine conditions out of
compliance, Hotel Reed submitted a plan of correction which was received
on May 27, 1982. No one at Hotel Reed had signed the plan and some of
the dates originally proposed by Hotel Reed for correction of (4)
deficient conditions were unacceptable to the survey agency Tr. 228,
232).
The survey agency returned the plan to Hotel Reed, but accepted the
changes as of May 28, 1982, based on the acquiescence of the
administrator obtained by telephone on that date. Tr. 256. /5/ The
survey agency certified the facility May 31, 1982, and on July 2 the
State executed a provider agreement effective June 1, 1982. /6/
HCFA disputed whether the survey agency had based its May 31
certification on a plan of correction which the survey agency could have
found acceptable prior to that date. /7/ HCFA also argued that a
facility which has been found to have one or more conditions out of
compliance may not be certified on the basis of a plan of correction.
The State relied on 42 CFR 442.105(a) and (b), which appears under 42
CFR Subpart C -- Certification of SNF's and ICF's:
Sec. 442.105 Certification with deficiencies:
General provisions.
If a survey agency finds a facility deficient in meeting the
standards specified under Subpart D, E, F, or G of (5) this part /8,/,
the agency may certify the facility for Medicaid purposes under the
following conditions:
(a) The agency finds that the facility's deficiencies, individually
or in combination, do not jeopardize the patient's health and safety,
nor seriously limit the facility's capacity to give adequate care. The
agency must maintain a written justification of these findings.
(b) The agency finds acceptable the facility's plan for correcting
the deficiencies.
Subpart D (42 CFR 442.202) requires an SNF to meet the standards set
out in Subpart K of Part 405 (42 CFR 405.1101 - .1137) "except for
provisions . . . accepted by the Secretary or the State survey agency
under a plan of correction as specified in Subpart B. . ." Subpart B,
captioned "Provider Agreements," specifies (42 CFR 442.12(c)) that
a
provider agreement must be in accordance with the certification
provisions in Subpart C, which includes 42 CFR 442.105. Subpart E
requires an ICF to meet standards set out in Subparts F or G and
contains a similar exception "for provisions waived or accepted under
plans of correction as specified in Subpart C. . ." 42 CFR 442.253.
In its State Operations Manual, which instructs survey agencies on
procedures and regulatory criteria for certification, HCFA divides these
criteria into "elements," "standards," and "conditions."
Tr. 263-264;
section 2320 Survey and Certification Process: Compliance with
Conditions of Participation. The Manual states:
Failure to comply with a required Condition of Participation
indicates a serious breakdown in one of the major health care or safety
systems of the facility. Therefore, if a Condition of Participation, or
Coverage, is not met, an agreement cannot be entered into or renewed,
and any existing agreement is subject to cancellation or termination.
The form used by a state survey agency to record its findings
contains a heading for each condition of participation, which in turn is
divided into standards, and each standard into elements. When a
surveyor determines that the intent of a (6) standard or element is not
met, the surveyor must also decide whether the reason underlying the
finding of non-compliance with the standard or element is of so serious
a nature as to also require a finding of non-compliance with the
condition. The Manual specifies the need for a plan of correction if a
facility is found to be non-complying with one or more "elements"
but in
effect does not permit a plan where a "condition" has not been met.
Tab
L, HCFA August 15, 1983, Response to Mississippi Interrogatory No. 11.
HCFA agreed that the survey agency could have certified on the basis
of a plan of correction if the survey agency had found the facility
deficient only in meeting "elements" or "standards", but
contended that
the survey agency could not certify once it found "conditions" out
of
compliance. The State official responsible for the certification of
Medicaid facilities testified that he "always" had been aware of the
direction in the State Operations Manual that a survey agency could not
certify if a condition was not met. Tr. 263. He had never before (or
since May 31, 1982) certified a facility with a condition not met. Tr.
253-254. /9/ Thus, he "was expecting" HCFA's letter of August 25,
1982,
asking him to explain why he certified a facility with nine conditions
out of compliance. Tr. 236.
HCFA contended that 42 CFR 442.105 and the State Operations Manual
equated a finding that a condition is not met with a finding that the
facility's deficiencies individually or in combination jeopardize the
health and safety of the patients or that the deficiencies seriously
limit the facility's capacity to give adequate care. This
interpretation parallels Medicare regulations regarding certification
(42 CFR 405.1905(a)) and is not contradicted by any of the Medicaid
regulations, including those upon which the State (7) relied. /10/ It
is also reasonable. /11/ The Board has held in past decisions that
where the Agency's interpretation of a regulation is reasonable, the
Board will not overrule the Agency based on some alternate
interpretation which the Agency might have adopted. See, e.g., Illinois
Department of Public Aid, Decision No. 440, June 16, 1983.
2. It is not relevant to the Board's determination of the validity of
the certification that State officials and the owner and employees of
Hotel Reed now testify that the health and safety of the patients was
not in jeopardy.
As discussed above, the Medicaid regulations provide that a survey
agency may certify a facility with deficiencies if the survey agency
finds acceptable the facility's written plan for correcting the
deficiencies. However, in addition, the survey agency must find (and
maintain a written justification of its finding) that the deficiencies,
individually or in combination, do not (1) jeopardize the health and
safety of the patients and (2) do not seriously limit the facility's
capacity to give adequate care. 42 CFR 442.105(a) and (b).
The State alleged that the Hotel Reed's deficiencies at the time of
certification did not jeopardize the patients' health and safety nor
seriously limit the facility's capacity to give adequate care, citing
the testimony of the owner and employees of Hotel Reed and of the two
State officials responsible for the certification and for the execution
of the provider agreement. HCFA argued that the certification was not
supported by written documentation of the finding required by 42 CFR
442.105(a). We find that the oral testimony offered by the State, even
if relevant, does not satisfy that requirement. To the contrary, the
only written documentation connected with the certification is the
survey report showing nine conditions not met. As we have seen in our
discussion on the first point, a finding of a condition (8) not met is
equivalent to a finding that the health and safety of the patients were
in jeopardy and that the facility's capacity to give adequate care was
seriously limited. The State may not substitute oral testimony by
others some 18 months later for contemporaneous written documentation by
the official surveyors.
We conclude also that even if we were to consider the oral testimony
in lieu of the required written documentation (and ignoring its apparent
conflict with the survey report), we would not be persuaded that the
requirement was met for certification with deficiencies. The finding
required by 42 CFR 442.105(a) must be made by a State survey agency
prior to certification and is not satisfied by the after-the-fact
opinions of the nursing home owner and his employees. In any event,
their testimony did not demonstrate that all of the conditions were met.
/12/ Thus, the State's reliance on that testimony is misplaced.
Similarly, we are not persuaded by the statements of the very State
officials whose actions set the stage for the disallowance which their
testimony attempted to reverse. The Director of the Medicaid Commission
is not an official of the survey agency called for in the regulation.
/13/ The survey agency official deliberately chose in May 1982 not to
overrule the survey findings, even though he knew that with (9) those
findings certification was not possible. His testimony 18 months later
apparently contradicting his earlier action was of little, if any,
probative value. As he characterized it, "in hindsight, I think maybe I
would have used maybe a qualified met instead of the not met". Tr. 239.
3. The State failed to show that the testimony it offered concerning
whether the Conditions of Participation were met was relevant or that
the Conditions of Participation were in fact met as of June 1, 1982.
The State alleged that all conditions of participation were in fact
met as of June 1, 1982, citing again the testimony of the owner and
employees of Hotel Reed and of the State officials whose actions
precipitated the disallowance. In so doing, it sought to impeach the
findings of its survey agency.
As we noted in the previous discussion, the survey agency is charged
with the responsibility for deciding whether conditions are met.
Accordingly, the testimony of the owner and employees of Hotel Reed and
even that of the Director of the Medicaid Commission is not relevant.
The survey agency official who testified supervised the surveyors,
but did not participate in the survey. When he met with the surveyors
to discuss their findings, he knew, along with them, that nine
conditions were found out of compliance. Tr. 228. The surveyors "felt
that that was the only way they could have marked them." Tr. 264. /14/
The supervisor did not visit Hotel Reed (after the May 11-12 survey)
until June 23, 1982. He characterized as "superficial" that visit
and
others which he and his staff made to Hotel Reed prior to the full
survey in September 1982. Tr. 266. To the extent that he or anyone
else documented what they saw, their observations were included in the
report (10) on the September visit. Tr. 267. /15/ We do not find that
his testimony supports the State's conclusion.
Even if we accept the testimony of the State's witnesses as relevant,
it did not establish that deficiencies were corrected or that all
conditions were met as of June 1, 1982. Most of the dates supplied by
the administrative supervisor at the hearing were after June 1. For
example, as noted previously, the dental services condition was not met
until August 31, 1982. See fn. 12, supra. n16 The State did not offer
to show that all conditions were met as of any other date between June 1
and the September 27 survey, nor do we find that the testimony
established any date earlier than September 27.
4. The Medicaid Commission had good cause to decline to enter into a
provider agreement with Hotel Reed.
The State argued that the Medicaid Commission was justified in
executing the provider agreement because it allegedly did not have good
cause to decline. HCFA contended that the survey findings showing nine
conditions out of compliance constituted good cause even though the
survey agency certified the facility.
The State cited a letter from the Administrator of HCFA dated May 29,
1981, which indicated that the State must have good cause to decline to
enter into a provider agreement "for all (11) certifiable beds" in
a
facility. Exhibit 3 to Brief of Appellant dated July 8, 1983. /17/ See
also 42 CFR 442.12(d).
The Director of the Medicaid Commission testified that he had visited
the facility on June 17 and 24, 1982. He had a copy of the survey
report with him and after going through the list of conditions with the
owner concluded that all but one of the conditions "had already been
satisfied." Tr. 182, 201. /18/ Although the one condition he found not
met was not corrected until August 31, he revisited Hotel Reed on June
24 and on the basis of his two visits signed the provider agreement
effective June 1.
Although this was the first time in his seven years as head of the
Medicaid Commission that the Director had been presented with a
situation like this, he documented the visit only with "limited personal
notes" on the copy of the survey report he had with him. Tr. 201-202.
Moreover, although earlier in his testimony he had testified that he
would have been happy at the time to provide HCFA with "all the
documentation, the results of my visits," he was no longer certain he
could locate the notes in his files. Tr. 186, 202. /19/
We conclude that the Director not only had good cause but was
compelled by the Medicaid regulations to decline to enter into a
provider agreement until the facility was certified as meeting all
conditions. Even assuming that he was authorized to make a finding on
his own as to whether conditions were met or not met, the only written
documentation in this record, the survey report, showed conditions were
not met. /20/ Moreover, the Director, relying on the owner's
representation, testified that the dental services condition was not met
until August 31. Tr. 182-183.
5. HCFA properly exercised its look behind authority.
HCFA exercised its "look behind" authority under 42 CFR 442.30 to
declare the provider agreement invalid because the survey report found
conditions not met. The State contended that HCFA should have conducted
its own survey.
The "look behind" regulation authorized HCFA to make its
determination not only on the basis of onsite surveys and other Federal
reviews, but also State certification records, and reports from the
Medicaid or survey agency. 42 CFR 442.30(b). The State did not cite
any regulation requiring an Agency survey, nor do we know of any.
HCFA received copies of the certification and survey report from the
State on June 25, 1982 -- nearly a month after the effective date of the
certification and the provider agreement. Tr. 25. On its face the
certification did not indicate that there were conditions not met.
Exhibit 23, Appeal File. The package was reviewed in due course and
upon discovery of the survey findings the survey agency was asked to
explain its action. Tr. 27. In reply, the survey agency included in
its explanation the comment "(it) was felt that at least three months
were needed to bring (Hotel Reed) into compliance." Attachment H to HCFA
Response to Interrogatory No. 11.
The State characterized the two-month period between HCFA's receipt
of the State materials and the August 25 letter to the survey agency as
an "unreasonably lengthy delay." Mississippi Post-Hearing Brief, p.
50.
The HCFA Associate Regional Administrator for Health Standards and
Quality testified that the way the State submitted the file to HCFA --
covered by a transmittal showing all requirements met (based on a plan
of correction) -- made it easy for HCFA to miss the fact that there were
conditions not met. Tr. 361. We note also that the survey agency
official testified that he met quarterly with the aforementioned
Administrator and "almost daily" with the HCFA State representative.
Tr. 268. He apparently never used any of these occasions to call to
HCFA's attention the difficulty he knew existed regarding certification,
even though he had "a good relationship where we discuss things freely."
Tr. 270.
We do not find that the State has shown HCFA's actions to be dilatory
or its use of the "look behind" authority otherwise inappropriate.
(13) 6. The State's action was not justified by extenuating
circumstances.
The State argued that, given the history of this facility and the
circumstances of its new ownership, it was justified in certifying it.
HCFA contended that there were no exceptions for extenuating
circumstances.
It was not disputed that conditions at the facility had been
appalling prior to the transfer of ownership shortly before the survey
visit in May 1982. There was testimony about problems with the facility
dating back to 1976. It also was not disputed that the present owner is
an able and competent nursing home administrator and that he made "rapid
progress" in improving conditions. HCFA Post-Hearing Brief, pp. 9, 22.
However, as the survey found, he did not succeed in meeting all 18
conditions necessary for certification.
The only issue here is whether the State is entitled to the federal
share of payments for services rendered to Medicaid recipients. /21/ To
entitle the State to FFP, the certification must be a valid act, based
on a finding by the survey agency that all conditions are met. The
State has not shown that the Medicaid regulations permit certification
under extenuating circumstances and we are not aware of any such
provision.
Conclusion
For the reasons above stated, we affirm the disallowance. /1/ Unless
otherwise noted, all references to the Code of Federal
Regulations are to the edition dated October 1, 1981. /2/ When Gulf
View Haven was recertified in 1979, it regained its dual (ICF/SNF)
status. /3/ The owner was the administrator, his mother was the
director of nursing, and his wife was the patient activities coordinator
and social worker. /4/ The present owner is founder and
president of the Nursing Home Association in Mississippi and owner of
three other nursing homes. The survey agency had had an "excellent"
relationship with the three homes over the years. /5/ The survey agency
wrote in the corrected dates and sent Hotel Reed a copy. The plan was
dated June 9, 1982, and signed by the administrative supervisor for
Hotel Reed Tr. 159. /6/ The State relied on 42 CFR 442.13(c)(2),
which states that where federal requirements are not met on the date of
the survey, the provider agreement is effective on the date on which the
provider submits a plan of correction acceptable to the State survey
agency. /7/ HCFA alleged that the signed plan which the survey
agency received on June 11, 1982, was not acceptable because it
contained completion dates greater than 90 days after the survey and
that the Director of Certification did not correct the dates until June
28, 1982. HCFA Post-Hearing Brief, p. 18. The Director's testimony (at
the pages cited by HCFA) was that he corrected the dates which exceeded
90 days on "Friday the 28th", which had to be May, not June (June
28 was
a Monday). Tr. 256. It was this corrected signed copy which HCFA
received June 25, 1982. Tr. 260. /8/ Subpart D (442.200 - .202)
is captioned SNF Requirements, and Subpart E (442.250 - .254), ICF
Requirements. Subpart F (442.300 - .346) sets out standards for ICF
facilities other than facilities for the mentally retarded (ICF/ MR).
Subpart G sets out standards for ICF/MR facilities. /9/ The two
HCFA officials who testified at the hearing also stated that HCFA and
never certified or approved the certification of a facility with
conditions out of compliance. Tr. 29, 61. /10/ The State cited
42 CFR 442.202 and 42 CFR 442.253, which, as noted above, recognized
that certification may sometimes be based on a plan of correction.
These regulations do not authorize certification where conditions are
out of compliance. Other regulations cited by the State deal with the
effective date of certification, but do not address the circumstances
under which certification may or may not be issued. /11/ Not only did
the HCFA officials so testify (R. 52-53, 65), but also the
Director of the Mississippi Medicaid Commission stated that nine
conditions out of compliance were a matter "of grave concern." R.
179.
/12/ For example, 42 CFR 405.1129 requires an SNF to make "satisfactory
arrangements to assist patients to obtain routine and emergency dental
care." Pursuant to 42 CFR 442.317, if an ICF does not employ a qualified
professional to furnish a required institutional service, it must have
in effect a written agreement with a qualified professional. The
administrative supervisor of Hotel Reed testified that a contract for
dental services was not signed until August 31, 1982. Tr. 144. The
State official responsible for certification testified "the whole
condition of dental services is to have a contract." Tr. 249. The
Director of the Mississippi Medicaid Commission also testified that the
condition of dental services was not met until August 31. Tr. 182-183.
/13/ The Director also displayed considerable zeal in defending and
explaining his execution of a provider agreement where the survey report
showed conditions out of compliance. We do not accord much weight to
his testimony in general since we determine that it was characterized by
a lack of objectivity as primarily an attempt to justify the Medicaid
Commission's execution of a provider agreement. /14/ The State
did not offer the surveyors as witnesses, although at a telephone
conference on November 15, 1983, the State agreed it would make them
available if their testimony were necessary. Tr. 5. /15/ The
State also cited the survey agency official's testimony that he would
have considered certain conditions met if corrections had in fact been
made as of the dates testified to by Hotel Reed's administrative
supervisor in this hearing. As the counsel for the State noted, the
dates supplied by the administrative supervisor at the hearing
contradicted those Hotel Reed supplied for the plan of correction which
she signed on June 9, 1982. Tr. 243. When asked to explain the
discrepancy, she said "I just put a date down to be sure that I would
have plenty of time to correct it." Tr. 167. /16/ The
administrative supervisor did testify that a dentist at another facility
informally agreed "to help us out if we had any dental problems" until
a
contract was signed. Tr. 144. /17/ The letter in question was
rejecting a proposed amendment to the Mississippi State plan which would
have limited the number of Medicaid nursing home beds in Mississippi to
100 beds per 1000 Medicaid eligibles. /18/ This was the dental
service condition. See discussion in fn. 12, supra. /19/ We
assume that he could not locate them after the hearing, because the
State did not offer them or refer to them in its post-hearing brief. A
HCFA regional official testified he would have reviewed the Director's
documentation had it been provided to HCFA at the time. Tr. 108.
/20/ The State did not persuade us that we should accept the Director's
testimony without documentation. See fn. 13, supra. /21/ We
were not called upon to decide, nor do we decide, whether the owner of
the nursing home is entitled to retain the money he received from the
State for services to patients during the period in question.
NOVEMBER 14, 1984