Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: New York
State
DATE: September 30, 1993
Department of Social
Services Docket No. A-93-121 Audit
Control No. A-02-91-01048
Decision No. 1441
DECISION
The New York State Department of Social Services (New York) appealed
the
determination of the Health Care Financing Administration
(HCFA)
disallowing federal financial participation (FFP) in the amount
of
$3,423,172 claimed by New York under title XIX of the Social
Security
Act (Act). The disallowed costs were claimed for services
provided at
eleven state-operated alcoholism treatment centers (ATCs) to
individuals
under age 21 and age 65 and over.
HCFA found that the ATCs were not certified as Medicaid providers
as
required by the applicable provisions of the Act and regulations,
and
were thus ineligible to receive Medicaid funds under title XIX.
New
York did not dispute that the ATCs themselves were not certified
as
Medicaid providers but took the position that such certification
was
unnecessary because each of the ATCs in question was a component of
a
psychiatric center which was properly certified. New York pointed
out
that, prior to the reorganization of the Department of Mental
Hygiene,
which was responsible for the operation of both the ATCs and
the
psychiatric centers, HCFA permitted New York to claim FFP in the cost
of
services provided by the ATCs using the psychiatric centers'
provider
numbers. HCFA took the position that, due to the
reorganization, the
ATCs were freestanding facilities, and no longer
certifiable as
components of the psychiatric centers.
As set out more fully below, we conclude that the ATCs could have
been
included in the certifications of the psychiatric centers. HCFA
erred
in relying on the internal reorganization of the Department of
Mental
Hygiene as a basis for concluding that the ATCs were no longer part
of
the psychiatric centers. This reorganization did not
fundamentally
alter the relationship of the ATCs and the psychiatric centers,
which
operated as one unit in many respects. Thus, following
the
reorganization, New York could properly continue to claim FFP for
the
cost of the services provided by the ATCs using the psychiatric
centers'
provider numbers if the ATCs were included in the certifications of
the
psychiatric centers. 1/
Nevertheless, we find no evidence in the record sufficient to
establish
that any of the ATCs was included in the certification for a
psychiatric
center. Accordingly, we remand the case to HCFA to consider
any
documentation New York may provide to establish that an ATC was
included
in a psychiatric center's Medicaid certification. New York may
appeal
HCFA's determination on this limited issue pursuant to 45 C.F.R.
Part
16. To the extent that no documentation is submitted, we affirm
the
disallowance.
As also discussed below, we reject New York's position that
the
disallowance should be reversed even if New York cannot show that
the
ATCs were included in the psychiatric centers'
certifications.
Specifically, we find that--
o the lack of certification would raise questions about
whether
the services provided by the ATCs were of the type and
quality
which Congress agreed to fund;
o there is clear statutory authority for disallowing
any
expenditures for services furnished by a facility which is
not
properly certified;
o New York could not have reasonably relied on any agreement
by
HCFA to permit the ATCs to be surveyed and certified as part
of
the psychiatric centers if New York did not in fact provide
for
such survey and certification; and
o the denial of funding for ATCs which are not
properly
certified does not violate the prohibition
against
discrimination in the provision of Medicaid services
based
solely on medical diagnosis.
Below, we first identify the relevant statutory and regulatory
provisions
and then set out the factual background of this case. We
proceed to
discuss our conclusion that the ATCs could have been included
in the
certifications of the psychiatric centers. Next, we discuss our
finding
that there is insufficient evidence in the record to establish
that any of
the ATCs were in fact included in the psychiatric
centers'
certifications. Finally, we explain why New York's other
arguments do
not provide a basis for reversing the disallowance.
Statutory and Regulatory Background
Title XIX of the Act establishes a cooperative federal-state program
known
as "Medicaid" to enable states to furnish medical assistance to
eligible
individuals. Section 1901. A state may claim FFP in the cost
of
"medical assistance" furnished pursuant to an approved Medicaid
state
plan. Section 1903(a). Only services which meet the federal
definition
of medical assistance are covered by Medicaid. Section
1905(a); 42
C.F.R. . 440.2(b).
Alcoholism treatment services are not specifically identified in the
Act
as covered services; however, such services may under
certain
circumstances be covered as inpatient psychiatric services provided
in
an institution for mental diseases (IMD). See Section
1905(a);
Granville House, Inc., DAB No. 529 (1984). An IMD is a
facility of more
than 16 beds that is primarily engaged in providing
diagnosis, treatment
or care of persons with mental diseases. 42 C.F.R.
. 440.140(a)(2); 42
C.F.R. . 435.1009. Only individuals under age 21
and age 65 or over are
eligible for Medicaid funding for services provided in
an IMD. 42
C.F.R. . 435.1008(a)(2); 42 C.F.R. . 441.13(a)(2).
In addition, all facilities which provide services for which
Medicaid
funding is claimed must meet the applicable requirements
for
participation in the Medicaid program. Section
1902(a)(22)(B). The
state survey agency (which in the case of a
hospital must be the agency
responsible for licensing such institutions) is
responsible for
determining whether a facility meets those
requirements. Section
1902(a)(33)(B). If the requirements are
met, the survey agency
certifies this to the single state agency (which is
responsible for
administering the Medicaid program), which may then enter
into a
Medicaid provider agreement with the certified facility. If a
facility
is also seeking to participate in Medicare, the survey
agency's
certification is instead forwarded to HCFA as a recommendation
which
HCFA must review and approve.
To be certified as a provider of inpatient psychiatric services
under
Medicaid, a facility must meet the Medicare participation
requirements
for psychiatric hospitals in section 1861(f) of the Act and 42
C.F.R. .
482.60-482.62. These regulations in turn make applicable the
Medicare
conditions of participation in 42 C.F.R. . 482.1 through 482.23
and
482.25 through 482.57. 2/ Inpatient psychiatric services
to
individuals under age 21 must also be provided by a facility or
a
program which is accredited by the Joint Commission on Accreditation
of
Hospitals (now the Joint Commission on the Accreditation of
Healthcare
Organizations (JCAHO)). 42 C.F.R. . 440.160(b); 42 C.F.R. .
441.151(b).
Under 42 C.F.R. . 488.5, facilities which are accredited as
hospitals by
JCAHO are deemed to meet all of the Medicare conditions of
participation
for hospitals except the requirement for utilization review in
42 C.F.R.
. 482.30 3/ and special staffing and medical records
requirements
applicable to psychiatric hospitals.
Factual Background
The disallowance was based on the findings of an Office of
Inspector
General audit of services provided during the period July 1,
1985
through October 31, 1990 at eleven ATCs. See New York Ex. 1.
Each of
the ATCs in question was located on the grounds of a psychiatric
center.
4/ The auditors found that the services provided by the ATCs
to
Medicaid recipients were billed to Medicaid by using the provider
number
of the psychiatric center with which each ATC was associated.
The
auditors found that the ATCs were not part of the psychiatric
centers,
but were instead freestanding facilities which were not
separately
certified. Specifically, the auditors found that HCFA did
not certify
the ATCs for participation in the Medicare and Medicaid programs,
and
that the ATCs were not enrolled as providers in New York's
Medicaid
program.
The audit report stated that, prior to 1978, the ATCs, then known
as
alcoholism rehabilitation units, were an integral part of
the
psychiatric centers, and the cost of services provided by the ATCs
was
properly claimed under the psychiatric centers' provider
identification
numbers. 5/ At that time, the Department of Mental
Hygiene was
responsible for administering the system of state-operated
psychiatric
centers. Pursuant to state legislation, the Department of
Mental
Hygiene was reorganized in 1978, and several offices were created
within
it, including the Office of Mental Health (OMH) and the Office
of
Alcoholism and Substance Abuse (OASA). Over a period of two
years,
responsibility for overall administration of the services provided
by
the ATCs was transferred from OMH, which was responsible for
the
psychiatric centers, to the Division of Alcoholism and Alcohol
Abuse
(DAAA) within OASA. New York Ex. 1, at 2-3.
The relationship between DAAA and OMH with respect to the ATCs
was
governed by a Memorandum of Agreement (Agreement). The Agreement
stated
that--
The . . . [DAAA] is vested with authority for
management
control, and policy and program planning for the
ATCs.
Alcoholism Facility Directors are charged with
the
responsibility for policy implementation and daily management
of
the ATCs as directed by the Director of DAAA.
New York Ex. 5 at 2 (unnumbered). 6/ The Agreement also stated that--
OMH is responsible for providing Support Services,
Patient
Resources staff, Clinical Support and non-personal services
as
outlined in the body of this Memorandum.
Id. In addition, the Agreement provided that--
o DAAA is responsible for staff appointments for the ATCs;
o The DAAA capital budget is to be developed jointly by
the
psychiatric centers, the ATCs, OMH, and DAAA;
o DAAA will reimburse OMH for all non-personal services
costs
incurred by the psychiatric centers in support of the
ATCs
within the limits of DAAA's budget appropriation and
spending
plan;
o The Bureau of Costing and Rate Setting will
calculate
combined OMH/DAAA inpatient billing rates;
o Utilization review of ATC patients will be conducted by
staff
of the psychiatric centers;
o The psychiatric centers will provide physician and
other
medical coverage to the ATCs in the event of an emergency
or
other unforeseen event;
o Psychiatric center staff will be available for clinical
case
consultation for ATC patients who have a concurrent or
secondary
diagnosis of mental illness; and
o ATC staff will be available for clinical case
consultation
for psychiatric center patients with an alcohol
abuse/alcoholism
secondary diagnosis.
Discussion
I. There was a sufficient nexus between the ATCs and the
psychiatric
centers to provide a basis for including the ATCs in the
certifications
of the psychiatric centers.
In determining that the ATCs were freestanding facilities which could
not
be included in the certifications of the psychiatric centers, HCFA
relied
primarily on the changes made by the reorganization of the
Department of
Mental Hygiene. It noted that some services which were
previously
provided by the psychiatric centers to the ATCs without
charge were later
charged to the ATCs pursuant to the Agreement between
OMH and DAAA as well as
pursuant to a Shared Services Agreement between
each individual ATC and the
associated psychiatric center. Further,
HCFA noted that there were some
areas in which the ATCs were totally
independent of the psychiatric
centers. HCFA pointed to the fact that
DAAA was solely responsible for
personnel appointments in the ATCs, and
that, absent an emergency or other
unforeseen event, DAAA was
responsible for medical coverage in the
ATCs. HCFA also claimed that
the Agreement gave DAAA, not OMH or the
psychiatric centers, the
authority to manage, control and develop policy and
program plans for
the ATCs. In addition, HCFA asserted that the ATCs
and the psychiatric
centers were separately evaluated and accredited by
JCAHO. Accordingly,
HCFA concluded that the ATCs could not properly
claim Medicaid
reimbursement using the psychiatric centers' provider
numbers.
New York asserted, however, that the sole purpose of the
reorganization
was to enable it to deliver services more efficiently and
effectively.
New York argued that the way a state chooses to organize its
treatment
resources is not a proper basis for a disallowance, citing in
support
Massachusetts v. Secretary of Health and Human Services, 816 F.2d
796
(1st Cir. 1987). According to New York, the reorganization did
not
affect the responsibility of the ATC directors for the overall
medical
care and treatment of inpatients in the ATCs. In addition, New
York
took the position that it was not significant that the ATCs
now
reimbursed the psychiatric centers for certain services because the
ATCs
did not have the option to purchase these services from any
other
source. New York argued that the fact that the ATCs depended on
the
psychiatric centers to provide these services was instead evidence
that
the ATCs were part of the psychiatric centers. New York also
asserted
that the close relationship between the psychiatric centers and the
ATCs
was shown by the fact that OMH, as part of the services furnished to
the
ATCs, determined the Medicaid eligibility of ATC inpatients
and
maintained all documentation on Medicaid eligibility and
patient
billing. New York emphasized the responsibility of the
psychiatric
centers for utilization control and quality assurance in the
ATCs.
Further, New York noted that each psychiatric center and the
associated
ATC had a single cost report and the same Medicaid rates. 7/
Finally,
New York noted that State law mandates regular, ongoing
coordination
among the divisions and offices within the Department of Mental
Hygiene.
HCFA did not identify any specific statutory or regulatory criteria,
or
any other written guidance, which it applied in determining that
the
ATCs could not be included in the certifications of the
psychiatric
centers. In the absence of any such criteria, we conclude
that, since
one could reasonably infer from the evidence presented by New
York that
the ATCs were part of the psychiatric centers, the ATCs could have
been
included in the psychiatric centers' certifications. 8/
HCFA itself acknowledged that "there is some commonality" in
the
activities of the ATCs and the psychiatric centers. HCFA brief
dated
7/30/93, at 8. It is also evident from the terms of the Agreement
that
the ATCs were more than simply tenants of the psychiatric centers.
For
example, although the ATCs had their own medical staff, some
medical
services were to be provided to ATC patients by the staff of
the
psychiatric centers. Moreover, the medical staff of the
psychiatric
centers and the ATCS were to provide consulting services to each
other
in their respective areas of specialty. Furthermore, HCFA did not
deny
New York's assertion that the psychiatric centers and the ATCs
were
linked for purposes of Medicaid admissions and billing,
rate
development, and utilization control. Thus, based on the record
here,
we find that the ATCs functioned as part of the psychiatric centers in
a
number of important areas.
In addition, we agree with New York that the fact that the ATCs
reimbursed
the psychiatric centers for certain non-personal services is
not evidence
that the two entities had an arms-length relationship.
Arrangements for the
transfer of funds between state agencies or
sub-agencies are not
uncommon. We see no basis for relying on such
internal accounting
procedures to establish that facilities under the
responsibility of one state
agency cannot be certified to participate in
Medicaid as one facility.
Moreover, we note that reimbursement for
these non-personal services was
required only to the extent that
sufficient funds were available, that other
services provided by the
psychiatric centers were not reimbursed, and that
there was no provision
in the Agreement for the ATCs to pay rent to the
psychiatric centers.
Furthermore, notwithstanding the changes made by the
reorganization,
responsibility for the operation of the ATCs and the
psychiatric centers
remained within the same state agency, the Department of
Mental Hygiene.
Although this responsibility was divided between DAAA and
OMH, they were
required by state statute to cooperate with each other.
Thus, HCFA
attributes undue significance to what was essentially an
internal
reorganization. A similar situation was presented in Oklahoma
Dept. of
Human Services, DAB No. 799 (1986), where the fact that both of
the
entities in question were ultimately responsible to the director of
the
Oklahoma Human Services Commission was critical to the
Board's
conclusion that the state properly certified one entity as a
component
of the other.
The Massachusetts case cited by New York provides additional authority
for
its position. The court there held that the Massachusetts
Department of
Education was not a third party with an independent
obligation to pay for
certain educational services provided by the
Massachusetts Department of
Public Welfare and charged to the Medicaid
program because both departments
were subdivisions of the Commonwealth
of Massachusetts. The court
stated that "[w]ere Massachusetts to
reorganize and create one `super agency'
to take over the functions [of
these agencies] . . . the . . . programs would
not change yet the
Secretary's third party argument would disappear."
Massachusetts at
803. The court's conclusion that "[t]his Medicaid
reimbursement
decision should not turn on how a state subdivides its social
welfare
function and authority" (id.) is equally applicable here.
Furthermore, HCFA's position is undercut by its concession that New
York
was properly reimbursed for services in the ATCs prior to
the
reorganization of the Department of Mental Hygiene. As New York
pointed
out, the ATCs had the same responsibility for overall medical care
and
treatment of their patients before as well as after the
reorganization.
Thus, HCFA can hardly claim that the fact that this
responsibility
rested with the ATCs demonstrated that the ATCs operated
independently
of the psychiatric centers. 9/
We note that New York did not dispute HCFA's contention that the ATCs
and
the psychiatric centers were separately accredited by JCAHO. In
our
view, however, this does not show conclusively that the ATCs were
not
part of the psychiatric centers for purposes of Medicaid
certification.
Under 42 C.F.R. . 440.160(b), for example, either the facility
or the
program providing inpatient psychiatric services for individuals
under
age 21 must be accredited by JCAHO. Thus, an ATC could have
been
separately accredited by JCAHO for purposes of this requirement.
It
does not necessarily follow that the entire facility, including the
ATC,
could not have been certified as a psychiatric hospital. The fact
that
the ATCs and the psychiatric centers were separately accredited by
JCAHO
would be relevant if New York were relying on this accreditation as
a
basis for deeming that the requirements for Medicare participation
were
met, pursuant to 42 C.F.R. . 488.5. However, New York did
not
specifically assert that the ATCs were included in the certifications
of
the psychiatric centers based on this deeming provision.
Accordingly, we conclude that it can be reasonably inferred from
the
evidence in the record that the ATCs were components of the
psychiatric
centers and could have been included in their Medicaid
certifications.
II. There is insufficient evidence in the record to establish that
any
of the ATCs were in fact included in the certifications of
the
psychiatric centers.
Notwithstanding our conclusion that the ATCs were not
freestanding
facilities, we find that New York did not establish that the
ATCs were
in fact included in the certifications of the psychiatric
centers.
According to New York, HCFA treated the psychiatric centers and
the
associated ATCs as combined entities for purposes of
Medicare
certification. New York also asserted that, pursuant to
a contract
with HCFA, New York's Office of Health Systems Management surveyed
the
ATCs as part of the psychiatric centers in 1985, 1986 and 1987
for
recertification purposes. The latter assertion ignores the fact
that
the disallowance covered a five-year period ending in 1990. In
any
event, the only evidence New York provided in support of
these
assertions was a Statement of Deficiencies and Plan of Correction for
a
survey of the Buffalo Psychiatric Center completed in June 1987.
This
document, supplied with New York's reply brief, cites deficiencies
in
records from "the alcohol treatment program" and "the Alcohol
unit."
New York Ex. 7 at 5 (unnumbered). 10/ New York stated that
this
referred to one of the ATCs in question here (the Margaret
Stutzman
ATC). However, it is possible that the references are not to
an ATC but
to another unit in the psychiatric center providing
detoxification
rather than rehabilitation services, or providing treatment
for patients
with a dual diagnosis of alcoholism and mental disease.
Absent documentation that the ATCs were certified as Medicaid
providers,
New York could not properly claim FFP for services provided by the
ATCs.
Nevertheless, we conclude that it is appropriate to give New York
an
opportunity to establish that the ATCs were included in
the
certifications of the psychiatric centers since the record here is
not
fully developed on this issue. The audit report states that
HCFA
officials confirmed that the ATCs were not certified either as
distinct
entities or as part of the psychiatric centers. According to
the audit
report, HCFA relied on written testimony from a contractor
which
performed certification surveys of the psychiatric centers beginning
in
April 1987 that the ATCs were not included in the surveys.
However,
this is essentially hearsay evidence which is not dispositive given
New
York's contrary position. The audit report also cited statements
of
officials at the ATCs in question that the ATCs were not included in
the
surveys of the psychiatric centers. However, there is no basis in
the
record for determining whether these individuals were in a position
to
know what was occurring in that regard. Moreover, the question
of
whether the ATCs were in fact included in the certifications of
the
psychiatric centers was simply not developed in the parties'
submissions
to the Board, which focused on the issue of whether the ATCs
could have
been included in these certifications as a matter of law.
Accordingly, we remand the appeal to HCFA to consider any evidence
which
New York may submit to show that the ATCs were included in
the
certifications of the psychiatric centers. 11/ If New York
disagrees
with HCFA's determination, it may appeal that determination to the
Board
pursuant to 45 C.F.R. Part 16. If New York fails to submit any
evidence
to establish for any period that any ATC was not included in
the
certification of a psychiatric center, the disallowance with respect
to
that ATC for that period is affirmed.
III. New York's other arguments do not provide a basis for
reversing
the disallowance.
New York also advanced several other grounds for reversal of
the
disallowance. New York argued that the disallowance was
unreasonable
because the ATCs provided "virtually identical medical
treatment
services" before and after the reorganization of the Division of
Mental
Hygiene. New York brief dated 5/6/93 at 4. New York
pointed out that
there was no dispute that the services provided were covered
services
under the Act's provisions for funding inpatient psychiatric
services in
IMDs. This argument is not persuasive, however. The
Act requires not
only that the services for which Medicaid funding is claimed
be covered
services, but also that the facilities which provide those
services be
properly certified as Medicaid providers. Contrary to what
New York
argued, moreover, the requirement for certification is not simply
a
technical requirement. Instead, its purpose is to insure that
the
services provided by a facility are of the type and quality
which
Congress intended to fund under title XIX. For example, to be
certified
as a provider of inpatient psychiatric services for individuals
under
age 21, a facility must provide "active treatment," defined
as
development and implementation of an individual plan of care,
designed
to achieve the recipient's discharge from inpatient status at
the
earliest possible time, no later than 14 days after admission.
42
C.F.R. . 441.154. In fact, the lack of a patient-specific
treatment
plan was one of the deficiencies noted for the Buffalo
Psychiatric
Center (New York Exhibit 7). Certification of the ATCs was
thus
necessary to assure that the services provided were eligible
for
Medicaid funding. Without certification, there is no assurance
that
these facilities were being periodically surveyed to assure
that
patients were receiving quality care.
New York also asserted that there was no statutory or common law
authority
for "HCFA's blanket demand for repayment of all FFP" for the
services in
question absent a determination that the funds were not
spent for purposes
authorized by title XIX. New York brief dated
8/26/93 at 3. In
support of its argument, New York cited both
Massachusetts and Maryland
Department of Human Resources v. Department
of Health and Human Services, 763
F.2d 1441 (D.C. Cir. 1985). According
to New York, a remedy of such a
"draconian" nature was not justified on
the facts of this case, where HCFA
conceded that the disallowance was
based solely on the status of the facility
where the services were
rendered. Contrary to New York's suggestion,
however, there is clear
authority for a disallowance on this basis.
Under section 1903(a) of
the Act, FFP is available only in "medical
assistance." Section 1905(a)
defines medical assistance as care and
services provided by certain
types of facilities, which are in turn required
to meet particular
standards. A facility which meets the applicable
standards may be
certified as a Medicaid provider. 42 C.F.R. .
482.1. Any amounts
advanced to a state which are not expended for
medical assistance are
considered overpayments, and are subject to recovery
by the Secretary
under section 1903(d). See Utah Dept. of Health, DAB
No. 1307 at 3
(1992), and cases cited therein. Thus, HCFA may properly
disallow any
expenditures for services furnished by a facility which is not
properly
certified. See also Oklahoma Dept. of Human Services, DAB No.
1010 at 6
(1989) (stating that "[s]ince the State plan is required by the Act
to
limit FFP to services provided in certified facilities,
section
1902(a)(22) of the Act, documentation of a facility's
certification
becomes a requirement of a state's claim for FFP.")
The cases cited by New York are not inconsistent with this conclusion.
In
Massachusetts, the court held that the Secretary could not properly
take a
disallowance based on the fact that services for which Medicaid
funding was
claimed were labelled as educational services rather than
medical assistance,
but must instead look at the nature of the services
themselves. At
issue here, however, is not only whether the services
constituted medical
assistance but rather whether they were provided by
a facility authorized to
participate in the Medicaid program. In
Maryland, the court upheld a
disallowance of title XX training stipends
for 153 of 228 trainees who were
not subsequently offered employment by
the state as required by the
Act. The court approved this disallowance
as reasonable and equitable
since only those expenditures that did not
benefit the program were
disallowed. The court contrasted the
disallowance with the "draconian
measure" of disallowing all funds
expended by the state. Maryland at
1452. Here, however, if New York
failed to comply with the applicable
requirements for providers, this
affected all services rendered by the ATCs,
so that there was no basis
for limiting the disallowance.
New York argued in addition that the disallowance was inequitable
since
nearly ten years had elapsed between October 29, 1982, when
HCFA
notified New York that there were "preliminary indications" that
the
ATCs should be viewed as separate from the psychiatric centers, and
the
time that HCFA took the disallowance. See New York Ex. 1 at
12.
However, the Board has previously held that an agency's delay in
taking
a disallowance does not invalidate the disallowance. See
Tennessee
Dept. of Human Services DAB No. 1054 at 12, n. 8 (1989), and cases
cited
therein. In any event, New York did not explain how it could
have
reasonably relied on HCFA's failure to take a disallowance
earlier,
given the clear requirements of the statute and regulations. 12/
New York also claimed that in 1983 HCFA officials acknowledged that
the
ATCs were part of the psychiatric centers and agreed to allow New
York
to use the psychiatric centers' provider identification numbers for
FFP
claiming. New York asserted that the disallowance was also
inequitable
given this agreement. However, any such agreement was
clearly
predicated on the ATCs in fact being included in the surveys
and
certifications of the psychiatric centers. If New York did not
meet
this condition, it cannot reasonably claim reliance on the
alleged
agreement.
New York argued further that the disallowance would result
in
discrimination against otherwise eligible Medicaid recipients in need
of
residential alcoholism treatment services. Both the Act
and
implementing regulations prohibit states from discriminating in
the
provision of services to Medicaid recipients based solely on
their
medical diagnosis. Section 1906(a)(10) of the Act; 42 C.F.R.
.
440.230(c). According to New York, the services in question were
not
generally available in any type of facility other than ATCs during
the
audit period, so that a denial of funding for the ATCs would
violate
this prohibition. This argument is not persuasive. The
disallowance
was based on HCFA's determination that the ATCs were not
properly
certified, not on the diagnosis of the patients in the ATCs.
Thus, any
discrimination in this situation is only tangentially related to
the
diagnosis of the patients. Cf. Joint Consideration: "Institutions
for
Mental Diseases", DAB No. 231 at 34 (1981), citing Schweiker v.
Wilson,
450 U.S. 221 (1980). In any event, New York's argument
overlooks the
fact that the patients in the ATCs in question have already
received the
services to which the disallowed costs relate. Moreover,
in the future,
New York can assure Medicaid funding for patients in ATCs by
taking
steps to assure that the ATCs are properly certified (if in fact
they
are not).
Conclusion
For the foregoing reasons, we conclude that the ATCs were not
freestanding
facilities, but components of the psychiatric centers which
could have been
included in the certifications of the psychiatric
centers. However, we
find that there is not sufficient evidence to
support a finding that the ATCs
were in fact included in the psychiatric
centers' certifications for any of
the period covered by the
disallowance.
Accordingly, we remand the appeal to HCFA to make a finding as to
whether
any of the ATCs was included in the certification of the
associated
psychiatric center based on any evidence furnished by New
York within 30 days
of its receipt of this decision or such longer
period as HCFA may
provide. New York may appeal any adverse
determination on this issue
alone to the Board pursuant to 45 C.F.R.
Part 16. If New York presents
no further evidence for any period that
the certification of a psychiatric
center included the associated ATC,
the disallowance with respect to that ATC
for that period is affirmed.
___________________________ M. Terry Johnson
___________________________ Norval D.
(John)
Settle
___________________________ Judith A.
Ballard
Presiding Board Member
1. HCFA also took the position that freestanding
ATCs were not
eligible to participate in the Medicaid program. We need
not address
this issue since New York did not assert that the ATCs were
separately
certified.
2. A separate requirement for maintaining medical records applies
to
psychiatric hospitals in lieu of the requirement in section
482.24.
See section 482.60(c).
3. Under that section, a hospital must have in effect a
utilization
review (UR) plan that provides for review of services
furnished by the
institution and by members of the medical staff to
patients entitled
to benefits under the Medicare and Medicaid
programs. A UR committee
consisting of a staff committee of the
institution or a group outside
the institution meeting certain
conditions must review the necessity
of (i) admissions to the
institution, (ii) the duration of stays, and
(iii) professional
services furnished.
4. HCFA's brief stated that the ATCs were, "for the most
part,"
located on the grounds of the psychiatric centers. HCFA
brief dated
7/30/93 at 6. However, the audit report indicated
without
qualification that the ATCs were on the grounds of the
psychiatric
centers. New York Exhibit (Ex.) 1, audit report at
6. This is
consistent with New York's representation that all of
the ATCs in
question were located on the grounds of the psychiatric
centers. See
New York brief dated 5/6/93 at 10.
5. HCFA confirmed in its brief that FFP was properly paid prior
to the
reorganization. HCFA brief dated 7/30/93 at 5.
6. The Agreement in New York Exhibit 5 covered only the period
January
1, 1989 to December 31, 1989. See New York Ex. 5 at
11. The parties'
arguments appear to assume that similar
agreements existed during the
entire period covered by the
disallowance.
7. New York provided a copy of a cost report for one of
the
psychiatric centers in question which it alleged included
both
psychiatric center and ATC costs. See New York Ex.
6. It is unclear
where in this document the ATC costs are
reported; however, HCFA did
not challenge New York's
assertion.
The record also includes a state plan amendment which New York
asserted
was approved by HCFA in 1990. The amendment provides for OMH
to
establish a per diem rate for three separate rate categories,
including
"Psychiatric/Alcoholism." The three rates are then averaged
to obtain a
Medicaid inpatient rate for all OMH facilities. See New
York Ex. 3,
last page. There is no indication as to how this differed
from the
methodology in effect earlier. (HCFA referred in its brief to
a
proposed state plan amendment which it stated was still under review.
It
is not clear whether HCFA was disputing that the plan provision cited
by New
York was approved.)
8. Although not cited by HCFA, the HCFA State Operations Manual
at
Part II, section 2024, contains a provision entitled "Certification
of
Hospitals with Multiple Components as a Single Hospital."
This
section states that "[a] hospital may establish an additional
facility
so organizationally or geographically separate as to make
it
impossible to operate as a component of a single hospital."
The
section further states that two or more components should be
certified
as a single hospital if all the following tests are met: (1)
all
components are subject to the control and direction of one
common
owner (i.e., governing body) responsible for the operating
decisions
of the entire hospital enterprise; (2) there is a single
chief medical
officer who reports directly to the governing body and
who is
responsible for all medical staff activities of all components;
(3)
there is a totally integrated medical staff (meaning that all
medical
staff members have privileges at all components and all
medical staff
committees are responsible for their respective areas
of
responsibility in all components of the hospital); and (4) there is
a
chief executive officer through whom all administrative
authority
flows and who exercises control and surveillance over
all
administrative activities of all components.
HCFA did not rely on this provision here, although it was cited by
the
Board in Oklahoma Dept. of Human Services, DAB No. 799 (1986),
and
appears in substantially the same form in the February 1, 1993
version
of the State Operations Manual. In any event, we note that both
the
requirement for a common owner and the requirement for a chief
executive
officer were satisfied here by the fact, discussed later, that both
the
psychiatric centers and the ATCs were subject to the control
and
direction of the same state department. Although there is no
indication
in the record that a chief medical officer was specifically
designated,
this requirement was satisfied since the ultimate responsibility
for
medical care resided with the psychiatric centers. In addition,
the
requirement for an integrated staff was met since psychiatric
center
medical staff and ATC medical staff provided consulting services
for
each other and since the utilization review committee (presumably
like
other committees) was responsible for reviewing services provided
by
both the psychiatric centers and the ATCs.
9. HCFA asserted that New York itself had referred at times to
ATCs as
freestanding facilities, e.g., in its 1990 Five Year
Comprehensive
Plan for Alcoholism Services in New York. Even if
New York
characterized the facilities as freestanding, however, this
would not
be dispositive in light of the facts discussed above.
10. New York's assertions are consistent with the reference in
the
Agreement to "the combined Medicare status now held by OMH
facilities
and their co-located ATCs." New York Ex. 5 at
9. However, the
Agreement may simply have been incorrect and is
not itself evidence of
certification.
11. Acceptable documentation might include survey forms
and/or
certification and transmittal forms for a psychiatric center
which
show that the patient beds in the ATC were included in the
survey or
certification.
12. Both this and the argument discussed below are tantamount to
an
argument that HCFA was estopped from taking the disallowance.
As the
Board has previously noted, estoppel against the federal
government,
if available at all, is not available on the same terms as
would apply
to private parties. In addition to proving the
traditional elements
of misrepresentation, reasonable reliance and
detriment, a party must
also prove affirmative misconduct. See
New Century Development
Corporation, DAB No. 1438 at 6, n. 3 (1993),
and cases cited therein.
New York did not address the special issues
involved with estoppel
against the federal government, much less
establish reasonable