Illinois Department of Public Aid, DAB No. 559 (1984)

GAB Decision 559
Docket No. 84-32

August 31, 1984

Illinois Department of Public aid;
Ballard, Judith; Settle, Norval Ford, Cecilia


The Illinois Department of Public Aid (Illinois, State) appealed a
disallowance of $4,507,896 by the Health Care Financing Administration
(HCFA, Agency). The $4,507,896 was paid to Illinois, based on
expenditure reports for the quarters ended December 31, 1980 through
December 31, 1981, as federal financial participation (FFP) in payments
to 24 nursing homes for periods in which they allegedly did not have
valid provider agreements.

Title XIX of the Social Security Act authorizes FFP in payments to a
nursing home which has an agreement with a state to provide services to
Medicaid recipients (provider agreement). In Ohio Department of Public
Welfare, Decision No. 173, April 30, 1981, the Board held that under 45
CFR 205.10(b)(3), promulgated in 1973, and a December 1970 Program
Regulation Guide (PRG-11), interpreting the regulations then in effect,
FFP was available subsequent to termination or nonrenewal of a provider
agreement where a facility contests the termination or nonrenewal of the
provider agreement or the prerequisite state certification and by state
law or court order a state is required to continue payments pending the
provider appeal. The availability of FFP in payments for services to
Medicaid recipients during a provider appeal is limited to a maximum of
12 months from the termination or nonrenewal. Ohio, supra, pp. 8-12.
See also Colorado Department of Social Services, Decision No. 187, May
31, 1981; and Michigan Department of Social Services, Decision No. 290,
April 30, 1982. The courts have upheld this interpretation in Michigan
Department of Social Services v. Schweiker, 563 D. Supp. 797 (D. Mich.
1983) and Colorado Department of Social Services v. Department of Health
and Human Services, F. Supp. (D. Colo. 1984).

In this decision we resolve the parties' disputes about what periods
of time the facilities did not have valid provider agreements. The
State conceded the correctness of the periods for which HCFA disallowed
FFP in payments to eight of (2) the 24 facilities. /1/ The State also
agreed to withdraw its arguments for Convalescent Home and Dixon Health
Center based on HCFA's representation that the periods in dispute, all
of which were prior to September 1, 1980, preceded the period of service
covered by the disallowance. The parties further agreed that they would
address any disagreement over the amount disallowed for each of the 24
facilities after the Board had decided during which of the disputed
periods, if any, the State was entitled to FFP in payments to the
remaining facilities. The State also reserved the right to claim FFP
for an additional 30 days after termination of a facility (to facilitate
transfers of residents), pursuant to 42 CFR 442.11.


There were ten issued involving FFP in payments to 14 facilities. We
decided them as follows:

1) We reverse the disallowance for periods when Ridgeview Care
Center, Somerset House, and Belmont Nursing Home were in the process of
informal reconsideration, since we determine that this process was part
of their provider appeals.

2) We find that the wording of appeal notices to the above-mentioned
three facilities (indicating that the appeal proceedings were post-,
rather than pre-, termination) did not negate the State law requirement
that continued the provider agreements in effect pending appeal.

3) We find that Ridgeview Care Center was no longer engaged in a
provider appeal within the meaning of PRG-11 after the facility was
acquired by a new owner.

4) We find that Somerset House was contesting its termination in a
bona fide provider appeal by showing that it had made substantial
progress in meeting its plan of correction, but that the Ora G. Morrow
facility was only attempting to show that the deficiencies were being or
had been corrected since the survery. Thus, we reverse the disallowance
as to Somerset but uphold the disallowance as to Ora G. Morrow.

5) We uphold the disallowance with respect to Beverly Nursing Home
for the period prior to the April 15, 1981 termination notice, but
reverse the disallowance for the period April 15 on, since HCFA did not
show that the facility was not pursuing a timely and valid appeal from
the April 15 notice.

(3) 6) We uphold the disallowance where facilities received notice of
termination but the State did not show that the facilities ever sought
review.(Coventry Terrace, Esma A. Wright Pavilion.)

7) We uphold the disallowance where the facilities pursued only
licensure appeals. (Highland House Nursing Center, Mill View Nursing
Center.)

8) We reverse the disallowance with respect to Johnson Nursing Home
for the period prior to the withdrawal of its provider appeal, even
though the provider appeal concerned deficiencies found in surveys made
subsequent to the survey upon which the State made its initial
determination not to renew.

9) We reverse the disallowance for periods prior to the date a
Certification and Transmitteal form was issued, where the State's
certification was based on approval of a request for a waiver. (Baptist
Retirement Home, Colchester Nursing Center, Crawford Terrace.)

10) We uphold the disallowance with respect to Apostolic Restmor
because the State did not document that there was a signed certification
prior to August 24, 1981.

ANALYSIS

1. The State is entitled to FFP for payments on and after the date of
its notice to a facility of the opportunity for informal reconsideration
where the facility responds with a timely appeal.

This issue involved payments to three facilities:

a. Ridgeview Care Center

The term of the provider agreement for Ridgeview Care Center ended
August 1, 1980. The facility was recertified March 20, 1981, based on
an acceptable plan of correction submitted March 6, 1981. HCFA
disallowed for the period September 1, 1980 through March 5, 1981. /2/

(4) b. Somerset House

The term of the provider agreement for Somerset House ended May 15,
1980. It was recertified November 17, 1980, based on an acceptable plan
of correction submitted October 30, 1980. HCFA disallowed for the
period September 1, 1980 through October 29, 1980.

c. Belmont Nursing Home

The term of the provider agreement for Belmont Nursing Home ended
October 15, 1980. The facility was not recertified during the
disallowance period ending December 31, 1981. HCFA disallowed for the
entire period starting October 16, 1980. The State did not dispute the
disallowance for the period October 16, 1980 through March 26, 1981.


In the instance of each of these facilities the survery agency
(Illinois Department of Public Health) notified the facility that it
(Public Health) had decided not to renew the facility's certification.
In those notices Public Health also advised the facilities that they
could request informal reconsideration of that decision, and each did
so. The notice to Ridgeview Care is dated August 8, 1980; to Somerset,
July 29, 1980; and to Belmont, March 27, 1981.n3


In each instance also, Public Health affirmed its initial decision.
The facilities then were notified of the opportunity for a joint hearing
before Public Health and the single State agency (Illinois Department of
Public Aid), and each availed itself of that opportunity. /4/ Ex. 31,
40, 1. In Belmont the hearing officer affirmed, on November 9, 1981,
the decision of the survey agency to terminate. Ex. 1. Ridgeview Care
was acquired by a new owner on November 1, 1980 and Somerset was still
in the appeals process when it was recertified.


HCFA argued that the Board's previous decisions limited states to FFP
during the formal parts of provider appeals and (5) did not make FFP
available during periods of informal reconsideration. HCFA asserted
that federal regulations required pretermination informal
reconsideration only if the full evidentiary hearing could not be held
prior to the effective date of termination. HCFA contended that, in
Illinois, informal reconsideration was part of the certification process
conducted by the survey agency (Public Health) and was intended solely
to bring the facility into compliance. HCFA said that only the single
State agency (Public Aid) was authorized to terminate a facility and
thus only that part of the process involving Public Aid (the formal
hearing) was a provider appeal. HCFA Br. pp. 11-16.

The State contended that its provider appeal process began with the
notice to the facility of the survey agency's initial decision, which
accords the facility the opportunity to refute the survey agency's
findings. The State maintained that this advance notice of the intent
to terminate, incorporating a detailed listing of alleged deficiencies,
was in accord with 42 CFR 431.153 (1979). /5/ Ill. Br. pp. 4-5.


In Illinois Department of Public Aid, Decision No. 220, October 21,
1981, the Board held that Illinois law continued provider agreements in
effect pending review of the nonrenewal or termination of a facility as
a Medicaid provider. The decision was based on PRG-11 and the Illinois
Administrative Procedure Act. /6/ In that case, however, the parties
did not raise an issue about whether FFP was available during a period
of informal reconsideration and thus the decision did not specifically
address that part of the State's review process.


The State implied in its argument here that federal regulations
mandated informal reconsideration when an evidentiary hearing would
occur after the effective date of a termination or nonrenewal and thus
made informal reconsideration an integral part of the appeals process.
Ill. Br. p. 3; (6) 42 CFR 431.154(a) (1979). /7/ HCFA argued that if
the provider agreement continued during the appeals process (as the
State argued and the Board found in Decision No. 220), then informal
reconsideration is not required.HCFA Br., p. 11.


It is not necessary for us to decide whether or not the federal
regulations mandated informal reconsideration here. Those regulations
state minimum federal requirements but do not rule out additional
procedures as part of a state's provider appeals process.

The process of informal reconsideration in Illinois is described in
the August 1981 Rules for Joint (Public Health -- Public Aid) Department
Actions Against Skilled Nursing Facilities and Intermediate Care
Facilities Participating in the Medicaid Program, promulgated pursuant
to 42 CFR 431.151 and certain Illinois statutes. HCFA Appeal File,
Appendix 3. The Rules govern the hearing procedures for denial,
suspension, or termination of a facility by Public Aid as well as by
Public Health when the latter seeks to deny, terminate, or refuse to
renew a facility's certification. The Rules require a single hearing
procedure initiated by notification by the two departments jointly.
They also require Public Health to schedule an informal reconsideration
when it determines that a facility has serious deficiencies which affect
the health, safety, or welfare of the residents or has repeat
deficiencies.

HCFA argued that informal reconsideration was a part of the process
of certification conducted by Public Health. HCFA described it as a
parallel alternative to the process of a plan of correction and
contended that it "focuses on bringing a facility into compliance rather
than contesting the allegations on non-compliance." HCFA Br. p. 13. As
HCFA noted, the Board has held in several cases that PRG-11 does not
apply where a facility was merely seeking time to come into compliance.
See Ohio Department of Public Welfare, Decision No. 385, January 31,
1983, pp. 2-4; Michigan Department of Social Services, Decision No.
290, April 30, 1982, pp. 16-17; and cases cited therein.

(7) We do not find that HCFA has shown that the State afforded
providers informal reconsideration solely to allow them time to come
into compliance. (Whether Somerset House attempted to use the process
for that purpose is discussed as a separate issue. See p. 9, infra.) We
are also not persuaded by HCFA's argument that informal reconsideration
by Public Health is not part of a provider appeal because only the
single State agency (Public Aid) can terminate a provider. The renewal
of certification by Public Health would have effectively ended the
threat of termination, and thus to the provider it was a first but
important step in the review process to try to persuade Public Health
not to carry out its proposed nonrenewal action.

HCFA has not defined a provider appeal in PRG-11 or in its
regulations.The Illinois Administrative Procedure Act requires the
continuation of a facility's provider agreement (and thus payments)
until the completion of the formal process, which necessarily includes
any period of review, including an informal reconsideration. The Board
held in Michigan Department of Social Services, Decision No. 290, April
30, 1982, p. 17, that a provider appeal could not be considered as
having commenced until a state has given notice to the facility of the
action giving rise to the appeal and thus FFP was not available until
then. However, we find that the notice by Public Health of the proposed
nonrenewal which afforded an informal reconsideration satisfies that
requirement and the provider appeal (if an appeal is taken) begins with
the date of that notice.In so holding, we simply recognize that a
process involving several levels of review has begun and is
distinguishable from Michigan where the State took no action to notify
the facility during the period in question. As Illinois pointed out,
any delay caused by the multi-stage nature of the review process would
not "reward the State for its lack of promptness in notifying a facility
of adverse action" (Michigan, p. 18), since the 12 month limitation on
FFP runs from the end of the term of the provider agreement regardless
of when the formal appeal begins.

Based on the above, we reverse the entire disallowance of FFP in
payments to Somerset, we reverse with respect to Ridgeview Care through
October 31, 1980, and we reverse with respect to Belmont from March 27,
1981 through October 14, 1981 (the end of the 12 month period following
the end of the term of the provider agreement). The balance of the
disallowed periods for Belmont and Ridgeview Care and upheld.

2. The written notices do not contradict State law continuing the
provider agreement pending appeal.

HCFA argued in the instance of the above facilities (Ridgeview Care,
Somerset, and Belmont) that the written notices advising the facilities
of their right to a formal (8) hearing indicated that the provider
agreement was not being continued pending appeal. HCFA Br., pp. 30, 33,
35. For example, the notice to Somerset (set out in HCFA's brief)
states:

If you should prevail at the administrative hearing the decision to
Terminate, Deny and/or Not Renew Medicaid Certification will be
rescinded. Be advised that by filing a Request for Hearing the
effective date of the termination of your certification to participate
in the Medicaid Program will not be rescinded or postponed. The
effective date will only be delayed or rescinded if you accept the
opportunity for administrative hearing and prevail at the hearing. A
POSTPONEMENT OF THE HEARING DATE DOES NOT POSTPONE THE EFFECTIVE DATE OF
YOUR MEDICAID TERMINATION. (Emphasis added by HCFA; upper case in
original.) Ex. 39.

HCFA suggested that the wording of this notice and similarly worded
notices to Ridgeview Care and Belmont might even be a basis for the
Board to reconsider its holding in Decision No. 220 that Illinois law
continues a provider agreement pending appeal. The Ridgeview Care and
Belmont notices contain the first sentence in common with Somerset, but
not the balance of the paragraph, including the part emphasized by HCFA.

Illinois countered by pointing to the following sentence which is
also common to all three notices and precedes the other sentence (above)
common to all three:

Pursuant to the above referenced rules, upon receipt of your request
for a hearing, a joint hearing will be held before a duly appointed
Hearing Officer of the Department of Public Aid to consider the
Department of Public Health's Decision to Terminate, and Not Renew
Medicaid Certification and the consequent termination of your provider
agreement with the Department of Public Aid based upon the Department of
Public Health's decision. (Emphasis added by Illinois.) Ex. 30, Ex. 0.

The State argued that the reference to consequent termination meant
that the provider agreement continued. The State contended in any event
that "one errant notice cannot change state law" and maintained that its
practice in the instance of these three and other facilities was to
continue the provider agreements pending appeal. Reply Br. p. 11. We
find that the State law as found in its Administrative Procedure Act is
not changed by the wording in the notice to Somerset. The Illinois
A.P.A. is not ambiguous on this point and while there may have been room
for doubt if all of the notices for these and other facilities had
contained the controversial language from the Somerset notice, we are
not persuaded on the basis of this one example that Illinois law fails
to satisfy the PRG-11 prerequisite for FFP in payments (9) during a
provider appeal. /8/ The question is not whether the notice stated an
effective date for a decision to terminate, but whether independent of
the appeals process for a particular facility there was a requirement in
State law that the provider agreement continue in effect pending appeal.


3. The State is not entitled to FFP in payments to Ridgeview Care after
it came under new ownership on November 1, 1980.

The State made a finding that as of November 1, 1980, the proceeding
to terminate Ridgeview Care became moot because the partnership which
previously owned it dissolved and the facility came under new ownership.
Ex. 32, 33. Even though this determination was made in proposed form in
March 1981 and finalized in July 1981, its effect was that payments to
the facility on November 1 and thereafter were not pursuant to the
facility being on appeal, nor was the certification of the facility or
its provider agreement continued after that date.

The State contended that this was the facility's way of asserting
that the allegation of noncompliance was unfounded. Reply. Br. p. 21.
We do not agree. The State's own tribunal found that the compliance of
the previous owner was no longer an issue as of November 1. The
facility was certified under new ownership and the new owner did not at
any time maintain an appeal. Accordingly, FFP is not available after
October 31, 1980.

4. The provider appeal of Somerset House was not solely to gain time to
achieve compliance, but that of Ora G. Morrow was.

a. Somerset

HCFA contended that in its appeal Somerset House sought only more
time to obtain compliance because it acknowledged its deficiencies and
merely sought to explain the delays in meeting a December 1979 plan of
correction. HCFA Br. p. 32. The facility's response to Public Health's
decision to (10) terminate does indeed set out the facility's
explanation of why it had failed to complete needed repairs, but one of
the two reasons for Public Health's decision was its preliminary
determination that Somerset had "failed to make substantial progress in
meeting its plan for correcting those deficiencies". Ex. 34. Thus, it
was appropriate to seek review on the basis that under the circumstances
it described, it had made substantial progress.

The Board has held that where a facility takes advantage of a
statutory (or regulatory) appeal, the Board assumes the facility is
primarily contesting the findings of non-compliance and is not merely
seeking time to achieve compliance. Pennsylvania Department of Public
Welfare, Decision No. 217, September 30, 1981, p. 5. Here, the State
has shown that Somerset did take issue with one of the State's findings.
Accordingly, this is a bona fide provider appeal covered under PRG-11.

b. Ora G. Morrow

The term of the provider agreement for Ora G. Morrow Center ended
April 30, 1981. HCFA disallowed FFP in payment for services from May 1,
1981 through November 18, 1981. The facility was recertified December 3
based on a survey on November 19, 1981.

The State did not dispute the disallowance for the periods from May
1, 1981 through June 16, 1981 and from August 22, 1981 through November
18, 1981. The State contended that from June 17 through August 21 the
facility was in the process of appealing the nonrenewal of its
certification. /9/ HCFA argued that PRG-11 did not apply because 1) the
facility was pursuing informal reconsideration; and 2) the facility did
not refute the survey agency's findings of non-compliance, but only
attempted to show they were being or had been corrected (after the
survey). HCFA Br. p. 39


Here, unlike the Somerset situation, the facility did not contest the
finding that it had failed to comply with State and federal requirements
for certification. Instead, the facility described its efforts to
comply following the survey. Ex. 62. Its efforts to come into
compliance may be commendable, but they do not constitute a provider
appeal (11) within the meaning of PRG-11. See Ohio Department of Public
Welfare, Decision No. 368, December 20, 1982, p. 5, where the Board
upheld a disallowance of FFP in payments to facilities which sought only
more time to correct their deficiencies, even though one facility
referred to them as "so-called deficiencies". Accordingly, the State is
not entitled to FFP for Ora G. Morrow. /10/


5. The State is entitled to FFP in payments to Beverly Nursing Home
from April 15, 1981.

The term of the provider agreement for Beverly Nursing Home ended on
October 31, 1980. HCFA disallowed FFP in payments for services from
November 1, 1980 through August 24, 1981. /11/ The State did not
dispute the disallowance for the period November 1, 1980 through January
29, 1981. Ill. Br. p. 9.


The State contended that it was entitled to FFP pursuant to PRG-11 as
of January 30, 1981, the date of a notice of an opportunity for an
administrative hearing on the proposed termination of the facility. Ex.
3; Ill. Br. p. 8. In a telegram dated April 21, 1981, responding to a
similar notice dated April 15, the facility alleged it had not received
the earlier notice. Ex. 4, 5. After sending the facility another copy
of the January 30 notice on September 10, 1981, Public Health rescinded
its decision to terminate and announced it would certify the facility.
Ex. 7, 8.

HCFA argued that PRG-11 did not apply because the facility had not
requested a hearing within the ten-day time limit set in the January 30
notice. HCFA noted that the State had taken the position that the
notice was sent and HCFA relied on "hornbook law that a document mailed
is presumed received." HCFA Br. pp. 19, 20. HCFA also contended that
the facility had never actually requested a hearing, even after
receiving the April 15 notice.

We find that in the absence of a showing that the facility actually
did receive a termination notice prior to April 15, 1981, PRG-11 applied
from that date.Our conclusion is strengthened by indications in
contemporaneous documents that (12) it was unclear exactly when the
notice was mailed, thus raising the possibility that it may not have
been mailed properly or at all (prior to September 10, 1981). /12/ The
State should not be penalized (except for the loss of FFP prior to April
15) because under these circumstances it gave the facility the benefit
of the doubt as to whether it actually received notice and afforded the
facility another opportunity for a hearing. The hornbook rule relied on
by HCFA may be useful in protecting due process from abuse, but the
State should not be denied FFP for not applying the rule in doubtful
situations such as this.


We find also that the April 21 telegram and a related followup letter
from the facility dated April 27, 1984, together constituted a request
for a hearing. The telegram noted that the State had said it had not
implemented its decision to terminate and would delay implementation to
enable the facility to investigate and respond. It also noted that on
or before April 23 the State was to advise the facility what recourse
was available. Ex. 5. The April 27 letter recounted that the facility
had been advised to write a letter to request a hearing, referred to the
telegram, and expressed the hope that it could clarify the matter before
the State took "the action of decertification." Ex. 6. Perhaps the
language used in the letter could have been more direct, but the concept
of a provider appeal under PRG-11 is not so narrow as to preclude
loosely worded hearing requests.

Thus, we reverse the disallowance as to Beverly for the period April
15 - August 24, 1981. The State, as noted above, would have us reverse
from January 30. But the State cannot have it both ways. If we counted
time from the January 30 notice, there would have been no provider
appeal because the State did not show that the facility responded
timely. The State is not entitled to be rewarded where it did not have
a means of knowing for certain that a notice was sent and received. At
best, as here, the State may get FFP from the date of a notice actually
received and acted upon.

(13) 6. There is no provider appeal within the meaning of PRG-11 where
the State gave notice but the facility did not request a hearing or
other review.

This issue involved two facilities.

A. Coventry Terrace

The term of the provider agreement for Coventry Terrace Nursing
Center ended on July 31, 1980. It was recertified on January 23, 1981,
based on an acceptable plan of correction submitted on January 7, 1981.
HCFA disallowed FFP for the period August 1, 1980 through January 6,
1981.

The State did not dispute the disallowance for the period August 1
through August 25. By letter dated August 26, 1980, Public Health
notified the facility of an initial decision not to renew certification
and advised the facility of its opportunity to appeal. Ex. 14. The
State contended that FFP was available for the period August 26, 1980
through January 6, 1981, because by Public Health issuing the notice the
appeals process had begun. Ill. Br. p. 10.

We agree that the appeals process is begun as of the date a notice
issues, but in the absence of a showing that the facility actually
responded to the notice and sought review there is no basis for FFP
under PRG-11. HCFA argued this and the State did not mention Coventry
in its Reply Brief, so we assume that the State could not document that
Coventry appealed. Accordingly, we uphold the disallowance.

b. Esma A. Wright Pavilion

The term of the provider agreement for Esma A. Wright Pavilion ended
on March 31, 1981. The facility was recertified September 8, 1981,
based on an acceptable plan of correction submitted May 11, 1981. HCFA
disallowed FFP for the period April 1, 1981 through May 10, 1981.

The State did not dispute the disallowance for the period April 1
through 23. By letter dated April 24, 1980, Public Health notified the
facility of an initial decision not to renew certification and advised
the facility of its opportunity to appeal. Ex. 20. The State contended
that FFP was available for the period April 24 through May 10 because by
Public Health issuing the notice the appeals process had begun. Ill.
Br. p. 11; Reply Br. p. 19. HCFA noted that the facility did respond
to the notice by submitting a plan of correction, but argued in effect
that this did not constitute a provider appeal within the meaning of
PRG-11. Ex. H; HCFA Br. p. 24.

(14) We find, as in Coventry, that there is no provider appeal here.
The submission of a plan of correction without more was merely an effort
to come into compliance and indicated that the facility did not contest
the finding of deficiencies. Thus, as we have discussed previously,
supra. p. 9, the facility's response did not perfect its appeal.
Accordingly, we uphold the disallowance.

7. The State was not entitled to FFP for periods when facilities sought
review of denials or revocation of their State licenses.

This discussion involves two facilities.

a. Highland House Nursing Center

The term of the provider agreement for Highland House ended April 3,
1980. The facility was recertified November 21, 1980, based on an
acceptable plan of correction submitted October 23, 1980. HCFA
disallowed FFP for the period April 4 through October 22, 1980.

The State did not dispute the disallowance for the period April 4
through June 8, 1980. Ill. Br. p. 12. By a document dated June 9,
1980, Public Health advised the facility that its application for a
license was denied. Ex. 22. The facility requested a hearing and
Public Health issued a probationary license effective October 23, 1980.
Ex. 23. On November 11 the facility's earlier request for a hearing was
continued, apparently to give the facility the opportunity "to include
all affected State and Federal Agencies within the presently pending
cause so that all legal issues may be joined and resolved
simultaneously." Ex. 24. The State argued that as of June 9 there was a
provider appeal.

HCFA contended that the availability of FFP pursuant to PRG-11 did
not apply to a license appeal, citing the Board's holding in New York
Department of Social Services, Decision No. 181, May 29, 1981, at p. 6.
HCFA also contended that the State had not shown that the lack of a
license was the only reason for the nonrenewal of certification, raising
the possibility that there were violations of the Medicaid regulations
which were not involved in the license appeal. HCFA Br. pp. 25-28.

The State also relied on New York, citing another holding by the
Board there to the effect that FFP might be available for court-ordered
payments during an appeal from the revocation of a license. New York,
supra, p. 6. The State contended that the cited holding meant that,
pursuant to 45 CFR (15) 205.10(b)(1), FFP was available during license
appeals. /13/ The State also pointed to Colorado Department of Social
Services, Decision No. 187, May 31, 1981, as a case where the Board had
treated "delicensure and decertification proceedings . . . the same."
Reply Brief, pp. 6-9.

The State's reliance on New York and Colorado is misplaced. In New
York, not only did the Board specifically hold that license appeals did
not come within the purview of PRG-11, but also indicated that 45 CFR
205.10(b)(1) was limited to applicant/recipient hearings. New York,
supra, p. 19. Thus, 45 CFR 205.10(b)(1) has no application to provider
appeals.

The State did not cite a particular page in Colorado; it may have
been referring to the Sunset Manor facility, which was notified that its
license would be revoked and its Medicaid certification terminated.
Colorado, supra., p. 15. By treating the Sunset Manor review
proceedings as a provider appeal, the Board did not give licensure equal
status with certification. In Colorado, the provider had appealed the
findings on which decertification was based. Although having a valid
license under state law is a prerequisite for Medicaid certification, an
appeal solely from a license revocation does not necessarily amount to
contesting all of the deficiencies which might provide a basis for
decertification.

Here, it was not until November 11, 1980 -- after Highland House had
been recertified -- that the proceeding to review the license denial was
continued to consider whether there were issues of noncompliance with
federal regulations. Thus, during the period at issue the record does
not show that the delicensure dealt with all of the issues which might
have provided a basis for decertification. Accordingly, we uphold the
disallowance.

b. Mill View Nursing Center

The term of the provider agreement for Mill View ended on September
30, 1980. The facility was recertified October 1, 1981 based on an
acceptable plan of correction submitted September 11, 1981. HCFA
disallowed FFP for the period October 1, 1980 through September 10,
1981.

(16) The State did not dispute the disallowance for the period
October 1, 1980 through June 14, 1981. By a document dated June 15,
1981, Public Health notified the facility that its license was revoked
effective June 30, 1981. Ex. 25. /14/ The State contended that it was
entitled to FFP for the period from June 15 through September 10 because
the facility was appealing its delicensure.


For reasons set forth in the preceding discussion on Highland House,
we uphold the disallowance. In addition, we note that even if this had
been a provider appeal, the availability of FFP pursuant to PRG-11 would
have ended with the transfer of ownership on August 1, 1981.

8. FFP is available in payments to Johnson Nursing Home for the period
through September 21, 1980.

The term of the provider agreement for Johnson Nursing Home ended
December 14, 1979. The residents were transferred to other facilities
on November 24, 1980. Ex. 60. HCFA disallowed FFP for any payments on
and after September 1, 1980, the period covered by this disallowance.

The State did not dispute the disallowance for the period September
22 through December 11, 1980 and after December 14, 1980. /15/


On August 28, 1980, the facility requested a hearing on an August 21
decision of Public Health to not renew its certification. HCFA did not
dispute that as of August 28 (and therefore September 1), the facility
was engaged in a provider appeal within the meaning of PRG-11. HCFA
Br., p. 37. HCFA noted that there had been surveys and certification
determinations based on those surveys subsequent to the commencement of
the informal reconsideration review process on June 13, 1980 (and thus
also subsequent to the end of the term of the provider agreement). HCFA
contended that those surveys and determinations had ended the
availability of FFP, citing Decision Nos. 173 (Ohio) and 187 (Colorado).

(17) HCFA misunderstood the Ohio and Colorado decisions on the effect
of subsequent surveys and certification decisions based on those
surveys. In Ohio, the Board held (p. 14) that if within the 12 months
following the end of the term of certification/provider agreement there
is a provider appeal but

a state surveys the facility and makes a new determination on
certification, FFP may not be available beyond the date of that
determination if the only basis for FFP would be the pendency of the
court order and the provider appeal. (emphasis added.)

In Colorado, the Board repeated this holding (p. 8), leaving out
mention of court ordered appeals because Colorado, like Illinois (and
unlike Ohio), has a statutory appeal.

The Board's holding is based on availability of FFP as a result of a
facility being beyond the term of its provider agreement but pursuing a
provider appeal. If the State conducts a new survey, subsequent to the
commencement of the appeal, and as a result of the new survey decides to
recertify the facility, then of course FFP is available because the
facility is now certified. If the State decides not to recertify and
the facility does not take a new appeal, then FFP is not available
because the facility is not contesting its noncompliance. But if the
State decides not to recertify and the facility does appeal, as HCFA
acknowledged occurred in this case, then FFP is available because of the
new appeal. Thus, we reverse the disallowance for the period September
1 - 21, 1980. Of course, even with a new appeal FFP is available only
for up to 12 months from the end of the previous provider agreement.

The State also maintained that it was entitled to FFP for the period
from December 12 to December 14, 1980. On December 12, Public Health
declined to renew the facility's license, which was appealed, Ex. 59,
60. December 14 is the end of the 12 months following the end of the
provider agreement. We find that this issue is moot because as of
November 24, 1980, there were no longer any residents at this facility.
Also, we held at pp. 13-15, supra, that a licensure appeal does not
necessarily constitute a provider appeal within the meaning of PRG-11.
Thus, the State would not be entitled to FFP in any event.

(18) 9. The approval of waivers establishes that waivers were requested
at least as of the waiver approval dates, and FFP is available from
those dates.

The issue involved payments to three facilities:

a. Baptist Retirement Home

The term of the provider agreement for Baptist Retirement Home ended
on October 19, 1980. On August 7, 1981, Public Health approved a waiver
request. Ex. 43. The facility was recertified August 10, 1981. HCFA
disallowed FFP for the period October 20, 1980 through August 9, 1981.

b. Colchester Nursing Center

The term of the provider agreement for Colchester Nursing Center
ended on May 11, 1979. On January 29, 1981, Public Health approved a
waiver request. Ex. 50. The facility was recertified February 4, 1981.
HCFA disallowed FFP for the period September 1980 through February 3,
1981.

c. Crawford Terrace

The term of the provider agreement for Crawford Terrace ended on
November 30, 1978. HCFA did not dispute that the facility was in the
provider appeal process through November 30, 1979. The facility was
recertified January 19, 1981. HCFA disallowed for the period December
1, 1979 through January 18, 1981.

The State did not dispute the disallowance for the period December 1,
1979 through January 1, 1981. The Certification and Transmittal form
(C&T) states that "the facility has been in a corrective action process
and (is) being recommended for certification based on memo dated
1-12-81." Ex. R. In the disallowance letter, HCFA acknowledged that "on
January 12, 1981 the state survey agency decided to waive certain
standards required for certification." /16/


(19) In all three cases the State contended that the provider
agreements were effective on the dates that Public Health approved the
waiver requests, and did not dispute the periods covered by the
disallowance prior to those dates. /17/ HCFA argued that the approval
dates did not apply because in the waiver approvals Public Health
conditioned certification on the facility being "in compliance with all
other licensure and certification standards." HCFA asserted that to
substitute another date for that shown on the certification and
transmittal, the State must show by clear evidence that the survey
agency determined all requirements for certification were met, and that
the survey agency communicated its determination in writing to the
facility or the single State agency. HCFA relied on Illinois Department
of Public Aid, Decision No. 441, June 30, 1983, pp. 2-3 and cases cited
therein. HCFA Br., pp. 34, 36, 36.


The State relied on 42 CFR 442.13 (1980), which states:

(a) Basic Requirements. If the Medicaid agency enters into a provider
agreement, the effective date must be in accordance with this section.

* * *

(c) All Federal requirements are not met on the date of the survey.
If the provider fails to meet any of the requirements specified in
paragraph (b) of this section, the agreement must be effective on the
earlier of the following dates:

(1) The date on which the provider meets all requirements.

(2) The date on which the provider submits a correction plan
acceptable to the State survey agency or an approvable waiver request,
or both.

This regulation mandates that the effective date of the provider
agreement must be the earlier of the date requirements are met or the
date a facility submits its plan of correction or waiver request, or
both. It is not relevant that the State in its approval of the waiver
request recognized that certification could occur only if all other
standards were met; even if conditional, the approval establishes that
such a request or plan of correction or both had to have been submitted
at least as of the date of approval. Similarly, in the case of Crawford
Terrace, the C&T (20) indicates, ans HCFA acknowledged, that there was a
waiver approval -- and thus a request -- at least as of January 12,
1981, the date of approval.

HCFA's reliance on Decision No. 441 and that line of earlier cases is
misplaced. As the Board noted in Decision No. 441, supra, at p. 2, the
July 1, 1980 changes in the regulations governing the effective date of
a provider agreement (discussed above) were not in effect at the time of
the claims at issue in that case. Decision No. 441 and the other cases
cited dealt with the pre-July 1, 1980 requirement that the effective
date of a provider agreement may not be earlier than the date of
certification. 42 CFR 442.12(b)(1979). As discussed above, that
requirement was changed so that once the facility has been certified the
effective date of the provider agreement can be (among other dates) the
date an approvable waiver request was submitted. Here the State
established only the dates the waivers were granted. Thus, on this
record we have no basis to consider earlier dates for the payment of
FFP; consequently, we reverse the disallowances as of the dates the
waivers were approved.

10. The State did not properly document that Apostolic Restmor was
recertified prior to August 24, 1981.

The term of the provider agreement for Apostolic Restmor ended May
16, 1981. The facility was recertified August 24, 1981, based on the
submission of an acceptable plan of correction. Ex. 1. HCFA disallowed
for the period May 17 through August 23, 1981.

The State contended that the facility was recertified as of May 17,
1981 and submitted in support thereof a copy of a C&T dated May 15,
1981. Ex. 2. HCFA refused this documentation because the May 15 C&T
was not signed and the C&T on which HCFA relied for the August 24
certification was signed. /18/ HCFA maintained that it was the practice
of the survey agency to sign C&T's.


The State did not dispute the necessity of a signed C&T, and even
argued that the date of the signature was the best evidence of the date
of certification. Reply Br. p. 13. The State insisted that the May 15
C&T had been signed and that the signature simply did not show on HCFA's
copy. The State attached another copy of the C&T to its Reply Brief.Ex.
64.

(21) Our examination of both State exhibits showed no signature.
Perhaps, as the State suggested with respect to the copy sent to HCFA,
the signature simply did not copy. Whatever the reason, we have no
choice on this record but to uphold the disallowance.

Conclusion

For the reasons stated above, we reverse or uphold the disallowance
of FFP in payments to the facilities for services during the following
periods:

Reverse Uphold n19 Apostolic
Restmor 5/17/81 - 8/23/81 Baptist
Retirement 8/7/81 - 8/9/81 10/20/80 - 8/6/81 Home
Belmont Nursing 3/27/81 - 10/14/81 10/16/80 - 3/26/81
Home 10/15/81 - end n20
Beverly Nursing 4/15/81 - 8/24/81 11/1/80 - 4/14/81
Home Colchester Nursing 1/29/81 - 2/3/81 9/1/80 -
1/28/81 Home Coventry Terrace 9/1/80
- 1/6/81 Crawford Terrace 1/12/81 - 1/18/81 9/1/80 -
1/11/81 Esma A. Wright 4/1/81 -
5/10/81 Highland House 9/1/80 -
10/22/80 Nursing Center Johnson Nursing 9/1/80 - 9/21/80
9/22/80 - end Home

(22)

Mill View Nursing 10/1/80 - 9/10/81
Center Ora G. Morrow Center 5/1/81 -
11/18/81 Ridgeview Care 9/1/80 - 10/31/80 11/1/80 -
3/5/81 Center Somerset House 9/1/80 - 10/29/80


The disallowance of FFP in payments to the remaining ten facilities
was not contested and is, of course, upheld. /1/ The eight facilities
are Cotillion Ridge Nursing Center, Elaine Boyd Creche Home,
Golf Mill Nursing Home, Manchester Manor, Morton Terrace, Ridgeview
House, Royal Gardens, and Starnes Nursing Home. /2/ In the
notification of disallowance, HCFA indicated that FFP in payments for
this facility (and others) was not allowable from the end of the term of
the provider agreement (for Ridgeview Care, August 2). Ex. 1. However,
as HCFA noted in its brief, the period covered by the disallowance on
appeal began September 1, 1980. HCFA Br. p. 29. Thus, issues with
respect to periods prior to September 1 are not before us. /3/
Public Health sent Ridgeview Care a notice dated July 14, 1980. The
facility responded on August 11 to the August 8 notice. HCFA noted that
the July 14 notice was not relevant since it was superseded by the one
on August 8 and the disallowance period began September 1. HCFA Br. p.
30. /4/ The notice to Ridgeview Care is dated November 24, 1980;
to Somerset, October 14, 1980; and to Belmont, May 22, 1981. Ex. 30,
39, 0. /5/ 42 CFR 431.151 through 154 sets out requirements for
appeal procedures which a state must make available "as a minimum" when
it denies, terminates, or fails to renew a facility's Medicaid
certification or provider agreement. /6/ The Illinois
Administrative Procedure Act in effect continues a provider agreement
until a final decision on renewal or termination and prohibits that
final action without notice and an opportunity for a hearing. Decision
No. 220, Order to Show Cause, p.

reconsideration. (a) If the State decides to provide the opportunity for
an evidentiary hearing required by Sec. 431.153 only after the effective
date of a denial, termination or nonrenewal, the State must offer the
facility an informal reconsideration, to be completed before the
effective date. /8/ HCFA also relied on an internal State
memorandum regarding Colchester Nursing Home. Ex. M. That memorandum
implied that Colchester's certification was terminated on March 31,
1980, which was subsequent to informal reconsideration but prior to a
formal hearing on April 8, 1980. The notice of the opportunity for a
formal hearing for Colchester is not in the record. The main thrust of
the memorandum has to do with some missing survey reports. The author
is not identified as someone qualified to provide an interpretation of
State law on this subject. /9/ Even though Public Health
rescinded its proposed termination on August 21, 1981, the facility was
recertified effective November 19, 1981. Thus, from August 22 through
November 18 it was not on appeal nor was it certified. /10/ If
the Board had upheld the State on this point, the Board would have
reached the informal reconsideration issue raised by HCFA. We held
earlier that informal reconsideration was part of the appeal process.
/11/ On August 25, 1981, the facility submitted an acceptable
plan of correction which was the basis on which it was recertified. Ex.
C /12/ The April 15 notice indicated that the facility had been
notified of the proposed termination as of March 2, 1981. Ex. 4. An
internal State memorandum dated May 18, 1981 indicated that "a legal
notice" was sent to the facility in February. The memorandum also
indicated that certain persons in Public Health, including the Chief of
the Division of Long Term Care, had the opinion that the facility had
waived its right to a hearing by not responding to the notice. /13/ 45
CFR 205.10(b)(1) is part of a regulation requiring states to provide a
system of hearings for applicants for, and recipients of, assistance
under various titles of the Social Security Act. 45 CFR 205(10)(b)(1)
declares the availability of FFP for Payments of assistance continued
pending a hearing decision. /14/ The facility requested a
hearing, and the review process was still pending as of approximately
September 1, 1981. On August 1, 1981, the facility was sold to a new
owner.Ex. 26, 65, L. /15/ The facility was in the process of
informal reconsideration from the time of a notice June 13, 1980 until
August 21, 1980, but that period was not in dispute because it preceded
the period covered by the disallowance. HCFA Br., p. 37. Ex. 54.
/16/ Later, HCFA contended that the absence of the January 12 memo or
other document precluded the State's claim to FFP. Brief, p. 36. The
State argued that in view of HCFA's admission no document was needed.
Reply Br. p. 24. /17/ For other reasons, the State disputed
periods prior to September 1, 1980 involving Colchester, but those
periods are not before us. /18/ HCFA also called attention to
the handwritten notation "9/1/81 - 4/30/ 82" on the C&T dated May 15.
The State said it did not know the purpose of this notation. Reply Br.
p. 13. /19/ This includes periods which were not contested by
the State. /20/ The disallowance included FFP claimed in
expenditure reports for the quarters ended December 31, 1980 through
December 31, 1981. HCFA has pointed out that services rendered from
September 1, 1980 are covered, so we assume that the period of covered
services ended November 30, 1981.In any event, we do not attempt to
define it here because we have no basis in the record.

JANUARY 08, 1985