SUBJECT: Comprehensive Mental Health
Center of Baton Rouge; Comprehensive
Mental Health Center of Alexandria;
and Comprehensive Mental Health Center of Monroe,

Petitioners,

Health Care Financing Administration

FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

Comprehensive Mental Health Center of Baton Rouge, Comprehensive Mental Health Center of Alexandria, and Comprehensive Mental Health Center of Monroe (Petitioners) appealed the November 3, 2000 decision of Administrative Law Judge (ALJ) Steven T. Kessel dismissing these cases on the ground that he did not have authority to hear and decide them. Comprehensive Mental Health Center of Baton Rouge, DAB CR709 (2000); Comprehensive Mental Health Center of Alexandria, DAB CR710 (2000); Comprehensive Mental Health Center of Monroe, DAB CR711 (2000). Although there is a separate decision number for each case, the ALJ issued a consolidated decision for all three cases, referred to here as ALJ Decision. Petitioners had sought an ALJ hearing to review the determinations of the Health Care Financing Administration (HCFA) classifying each Petitioner as a free-standing community mental health center (CMHC) rather than as a CMHC that was a provider-based unit of a skilled nursing facility. Petitioners' November 29, 1999 request for an ALJ hearing followed the September 23, 1999 decision by the Provider Reimbursement Review Board (PRRB) that it did not have jurisdiction to review HCFA's determinations.

On appeal from the ALJ Decision, Petitioners took the position that the ALJ erred in determining that he does not have authority to hear these cases. Petitioners argued that the ALJ had previously accepted jurisdiction in several other cases involving essentially the same situation presented here, and that the ALJ's dismissal was therefore arbitrary and capricious and amounted to a denial of due process and equal protection.

There are no material facts in dispute. Therefore, we review Petitioners' appeal from the ALJ's dismissals as a disputed issue of law. The applicable standard for review of questions of law is whether the ALJ decision is erroneous. See, e.g., Lake Cook Terrace Nursing Center, DAB No. 1745 (2000); Guidelines for Appellate Review of Decisions of Administrative Law Judges Affecting a Provider's Participation in the Medicare and Medicaid Programs.

Based on our rationale discussed below, we conclude that the ALJ did not err in concluding that Petitioners had no right to an ALJ hearing on HCFA's determinations that Petitioners were free-standing CMHCs. Accordingly, we sustain the ALJ's dismissals of Petitioners' requests for hearing.

Factual Background

We summarize briefly here those facts set forth in the ALJ Decision which the ALJ stated were undisputed by the parties.

Petitioners are wholly-owned subsidiaries of Comm-Care Corporation that were certified by HCFA to participate in Medicare as CMHCs and classified as free-standing facilities for purposes of Medicare reimbursement.⁽¹⁾ In their initial requests for Medicare certification, made in 1995 and 1996, Petitioners had requested classification as provider-based facilities.⁽²⁾ The ALJ found that it was unclear from the record if or how HCFA contemporaneously communicated to Petitioners or to Comm-Care that it had classified Petitioners as free-standing facilities.

After Petitioners were certified, Comm-Care relocated each of them from separate housing to the premises of a long-term care facility owned and operated by Comm-Care that was certified to participate in the Medicare program as a skilled nursing facility. On Comm-Care's December 12, 1997 cost report, Petitioners were reported as provider-based facilities. On February 9, 1998, HCFA's Medicare intermediary notified Comm-Care that it would have to refile that cost report because HCFA had classified Petitioners as free-standing facilities. Comm-Care then requested HCFA to classify Petitioners as provider-based facilities effective from June 1, 1996 forward.

In response to this request, HCFA notified Comm-Care by telephone on or about March 1, 1998 that HCFA had determined that Petitioners were free-standing facilities. HCFA also advised Comm-Care orally on July 9, 1998 that it had denied its requests for reconsideration. Petitioners then requested hearings before the PRRB to challenge HCFA's determination of their reimbursement status. The PRRB ruled both initially and on reconsideration that it lacked jurisdiction to hear these challenges. Petitioners then requested an ALJ hearing under 42 C.F.R. Part 498.

The ALJ's Findings of Fact and Conclusions of Law

The ALJ Decision concluded that Petitioners have no right to a hearing because: (1) HCFA's determinations that Petitioners were free-standing rather than provider-based facilities involved classification of the reimbursement status of Petitioners; (2) the regulations at 42 C.F.R. Part 498 do not confer a hearing right on a provider that is dissatisfied with the way in which HCFA classified it for reimbursement purposes. The ALJ contrasted the determinations made by HCFA here with a determination as to whether a prospective provider is qualified to participate in Medicare as a provider of services. Under 42 C.F.R. § 498.3(b)(1), the latter type of determination is an "initial determination" subject to the Part 498 procedures. According to the ALJ:

"Provider certification" is the act of determining whether a prospective provider meets the terms and conditions of participation in Medicare. Essentially, these terms and conditions address issues pertaining to quality of care, health, and safety. "Reimbursement classification" is the act of determining how a certified provider will be reimbursed for the services that it provides.

Petitioners are certified to participate in Medicare as are the skilled nursing facilities with which they are associated. HCFA never determined that Petitioners failed to qualify as providers of services nor has it determined to terminate their status as providers. The sole point of dispute between Petitioners and HCFA is the methodology by which Medicare reimburses for the services that Petitioners provide.

Id. at 6.⁽³⁾ The ALJ Decision further stated that "[s]ince reimbursement classification and participation are entirely separate concepts . . . Petitioners gain no hearing rights here from HCFA's original determinations to approve their participation and simultaneously to classify them as free-standing entities." Id. at 8 (emphasis in original).

The ALJ Decision noted that section 498.3(b)(2) was amended effective October 10, 2000 to give a provider the right to a hearing to challenge a determination as to whether it is a provider-based facility.⁽⁴⁾ The ALJ stated that "[a]rguably, Petitioners would have had hearing rights in these cases to challenge HCFA's determinations that they were free-standing and not provider-based facilities had this regulation been in effect on the dates that HCFA made its determinations." ALJ Decision at 8. However, the ALJ further stated that "I do not find that the regulation was intended to apply retroactively absent a clear statement of intent by the Secretary to apply it retroactively." Id.

In addition, with respect to Petitioners' argument that they will be denied due process if no entity in the Department of Health and Human Services will hear their cases, the ALJ stated that, while he was "not unmindful of the due process concerns raised by Petitioners," he had not been delegated the authority to hear and decide these cases. Id. at 8.

The ALJ Decision also noted that HCFA had taken "inconsistent positions . . . in other cases which involve reimbursement classification issues," and had "advocated" that the facilities be given hearings. The ALJ stated, however, that where HCFA did not consent to a hearing, he had held consistently that he does not have authority to hear and decide a classification issue. Id. at 6-7.

In view of his conclusion that he had no such authority, the ALJ found to be moot the remaining issues raised by the parties (whether Petitioners timely filed their hearing requests, and if not, whether they established good cause for not having done so; and whether Petitioners satisfied HCFA's criteria for provider-based reimbursement status). Id. at 5, 9.

On appeal, Petitioners disputed the ALJ's finding that HCFA's determinations involved a reimbursement classification issue rather than a provider certification issue. Petitioners contended that HCFA's determinations that they did not qualify as provider-based units raised an issue of provider certification that is an appealable "initial determination" under 42 C.F.R. § 498.3(b)(1). Petitioners took the position that the ALJ Decision should be reversed as arbitrary and capricious and a denial of due process and equal protection because the ALJ had provided a hearing in other cases involving essentially the same situation. Specifically, Petitioners claimed that their case was similar to Johns Hopkins Health Systems, DAB CR598 (1999), and Memorial Hospital at Easton, DAB CR634 (1999), where the ALJ reviewed the merits of HCFA's determination regarding provider-based status. In addition, Petitioners claimed that their case was different from Specialty Hospital of Southern California-La Mirada, DAB CR630 (1999), and Metropolitan Methodist Hospital, DAB CR574 (1999), where the ALJ found that he lacked authority to review HCFA's determination.

While the ALJ's ultimate conclusion that he had no authority to review HCFA's determination here is correct, we do not adopt the same rationale. Our rationale on review of three of the ALJ decisions cited by Petitioners also differed in some important respects from that in the decisions below. See Johns Hopkins, DAB No. 1712 (1999), Metropolitan Methodist Hospital, DAB No. 1694 (1999), and Specialty Hospital, DAB No. 1730 (2000). On the one hand, this Board does not view the scope of the authority delegated to DAB ALJs quite as narrowly as the ALJ Decision suggests. On the other, our rationale leads us to conclude that, contrary to what the ALJ suggested, there is a reasonable basis in the statute and regulations for distinguishing the situation here from ones in which HCFA consented to jurisdiction.

The Secretary has delegated to the DAB ALJs both the authority to conduct hearings for which there is a statutory right under section 1866(h)(1) of the Social Security Act (Act) and the authority to conduct hearings for which the right is accorded solely by regulation - either Part 498 or other regulations, which may incorporate the Part 498 procedures by reference. See Delegation of Authority dated October 13, 1993. Section 1866(h)(1) confers a hearing right on any institution or agency "dissatisfied with a determination . . . that it is not a provider of services or with a determination described in subsection (b)(2) . . . ." Subsection (b)(2) of section 1866 authorizes the Secretary to refuse to enter into a provider agreement or to refuse to renew or terminate a provider agreement for specified reasons.⁽⁵⁾ Part 498 not only implements section 1866(h)(1) and other statutory hearing provisions, but also accords some hearing rights not granted by statute. See, e.g., § 498.1(g).

The regulatory provision at section 498.3(b)(1), on which Petitioners relied, lists as one of the matters addressed in an appealable initial determination "whether a prospective provider qualifies as a provider." This language does not exactly track the reference in section 1866(h)(1) to a determination that an institution or agency "is not a provider of services" but is clearly related. The term "qualifies" appears in section 1866(a)(1) of the Act, which provides, with specified exceptions, that any "provider of services . . . shall be qualified to participate under this title . . . if it files with the Secretary an agreement" meeting specified requirements.

The ALJ implied that section 498.3(b)(1) is coextensive with his definition of "provider certification," which focuses on the determination of whether an entity meets quality of care or health and safety requirements. The Board has previously stated that "[m]eeting any aspect of the statutory definition of a hospital or other entity that may be a provider of services is a prerequisite to qualifying as a provider." DAB No. 1730, at 8-9, n.9; see also section 1864(a) of the Act. Medicare regulations also recognize that quality of care and health and safety requirements are not the only prerequisites for qualifying as a provider and that other aspects of the relevant statutory definitions (as well as the filing of a provider agreement meeting the specified requirements such as disclosure of ownership interests) are also prerequisites. See 42 C.F.R. § 488.3(a)(1); Part 489 (e.g., § 489.12(a)(2)).

Here, however, Petitioners did not argue that HCFA's determinations involved any statutory requirement that must be met to qualify as a provider. Instead, Petitioners focused on the timing of when they requested provider-based status, relying on the term "initial determination" used in sections 498.3(a)(1) and 498.5, on the reference to "prospective provider" in section 498.3(b)(1), and on their due process argument.

Petitioners' contentions have no merit, for the following reasons.

First, the modifier "initial" in the term "initial determination" is used to distinguish such a determination from a reconsidered determination under Part 498, not to indicate that it is made at the time a prospective provider applies to participate in the program. Section 498.5(a) says that a "prospective provider dissatisfied with an initial determination that it does not qualify as a provider" may request reconsideration and then is entitled to a hearing before an ALJ on the reconsidered determination. Under section 498.3(b), a determination is an "initial determination" only if it is "with respect to" one of the matters listed in that section. Petitioners here are not dissatisfied with HCFA's determinations with respect to whether they qualify to provide services as CMHCs, but are dissatisfied with the HCFA determinations with respect to whether they are free-standing or provider-based, a matter not listed in section 498.3(b). Nothing in the scope provisions in section 498.3 suggests that merely because a prospective provider has requested a determination on one of the matters listed in section 498.3(b), an entity is entitled to a hearing on any other matter addressed at the same time which was not listed.

Second, Petitioners' reliance on the prior cases is misplaced. Petitioners contended that their situation was the same as in Johns Hopkins and Memorial Hospital because, like the outpatient facilities in those cases, they "had been newly-established and applied initially for certification as provider-based units." P. Br. at 7 (emphasis in original). In fact, those cases involved outpatient facilities that were already approved as provider-based when HCFA made a determination to change their status to free-standing.

Moreover, Johns Hopkins is distinguishable from the instant case because the facility that sought to retain its provider-based status, an oncology center, would no longer have qualified as a provider of outpatient hospital services unless that facility continued to be classified as a provider-based unit of the hospital. The same appears to be true with respect to at least some of the outpatient facilities (such as the laboratory) in Memorial Hospital. Thus, Johns Hopkins and Memorial Hospital each raised an issue of whether the facility which sought provider-based status was properly included within a hospital's certification for purposes of providing particular types of hospital services. In contrast, the services provided by Petitioners were eligible for reimbursement as partial hospitalization services provided by a CMHC whether or not Petitioners were classified as provider-based facilities. The definition of "provider of services" in section 1866(e)(2) of the Act includes a CMHC for purposes of furnishing of partial hospitalization services, so CMHC status was sufficient by itself to qualify Petitioners, without regard to the nature of their relationship with the SNFs in which they were located. See also 42 C.F.R. § 400.202. Thus, Petitioners' cases raise solely an issue of how services should be reimbursed.⁽⁶⁾

Petitioners also relied on statements by the Board in Specialty Hospital and Metropolitan Methodist Hospital to the effect that the providers in those cases were not trying to attain provider status. Petitioners contrasted this with their situation, claiming that they were "prospective providers" who were entitled to a hearing under section 498.3(b)(1) because their requests for provider-based status were made in their initial requests for Medicare certification. However, the Board did not suggest in either Specialty Hospital or Metropolitan Methodist Hospital that a determination regarding provider-based status would necessarily involve a section 498.3(b)(1) determination if it were made when the provider's request for certification was acted on. The Board found only that there was no reviewable determination that an entity did not qualify as a prospective provider where the entity was already certified to participate in Medicare. Here, as in Specialty Hospital or Metropolitan Methodist Hospital, the determination that Petitioners were not provider-based was not a barrier to their providing services. The only type of service Petitioners sought to provide was partial hospitalization services, which may be provided by a CMHC irrespective of whether it is free-standing or based at an SNF.

Petitioners also maintained that, as in Johns Hopkins, their appeals would have been covered by the amended section 498.3(b)(2), had it been effective at an earlier date. By the same token, Petitioners attempted to distinguish their cases from Specialty Hospital on the ground that the Board stated there that the new regulations did not apply on the facts of that case (because the new regulations defined a "provider-based entity" in pertinent part as a provider of services of a different type from those of the main provider). However, the finding in Johns Hopkins that there was a right to an ALJ hearing was not based on the new regulations, nor was it dispositive in Specialty Hospital that the new regulations did not apply. Neither decision addressed the question considered by the ALJ here of whether the regulations apply retroactively.

As noted above, the ALJ concluded that the new regulations could not properly be applied retroactively since there was no clear statement of intent by the Secretary that they should be applied retroactively. Petitioners nevertheless argued that, "in light of HCFA's comments," the Board should find that the amended regulations merely clarified that there was an existing right to an appeal and were not being applied retroactively. P. Br. at 11.⁽⁷⁾ The "comments" to which Petitioners referred consisted of the statement in the preamble to the proposed regulations that "[w]e believe it is in the best interest of both HCFA and health care organizations to have an explicit procedure for handling these appeals." Id. at 10-11, quoting 63 Fed. Reg. 47552, 47592 (Sept. 8, 1998).

We do not view this language as a clear expression of an intent to apply the new regulations retroactively, however. The adoption of an "explicit procedure" does not necessarily mean that HCFA believed an appeal procedure for such cases was implicit in the existing regulations or in the statute. Indeed, the final regulations set a separate, later effective date for the provisions pertaining to provider-based status, including the appeals provisions (65 Fed. Reg. 18434, 18505-18506 (July 3, 2000)). Setting the later effective date is inconsistent with the notion that HCFA intended the regulations to have retroactive effect or considered the regulations to be merely implementing a pre-existing statutory right to a hearing.

Accordingly, we conclude that the ALJ did not err in concluding that the new regulations do not apply here.⁽⁸⁾

Petitioners further noted that, as in Johns Hopkins, their appeals were rejected by the PRRB before they requested an ALJ hearing, whereas in Specialty Hospital the petitioner had not requested review by the PRRB. However, the Board stated in Specialty Hospital that the unavailability of PRRB review "is not a sufficient basis for jurisdiction by itself," although it "might arguably provide a reason why we should construe an ambiguous provision in favor of review pursuant to Part 498." At 12. Since section 498.3(b)(1) is not ambiguous as applied to the facts of this case, the PRRB's finding that it lacked jurisdiction is not a basis for concluding that Petitioners had a right to an ALJ hearing. Moreover, as the ALJ indicated, the issue before him was not whether the lack of any administrative review deprives Petitioners of due process, but whether he had the authority to review HCFA's determinations. Finally, while Petitioners pointed out that the PRRB had characterized the HCFA determination of which Petitioners sought review as a "determination regarding whether a facility qualifies as a provider as a result of the survey and its certification process . . ." (P. Br. at 10, quoting P. Exs. 20, Docket Nos. C-00-145, C-00-146 and C-00-147), that characterization is incorrect and is not controlling here.

Conclusion

For the reasons stated above, we uphold the ALJ's conclusion that Petitioners' requests for hearing should be dismissed.

Donald F. Garrett

Marc R. Hillson

Judith A. Ballard
Presiding Board Member

1. Pursuant to section 1861(ff)(3)(B) of the Social Security Act, a CMHC is an entity which provides the mental health services described in section 1913(c)(1) (formerly section 1916(c)(4)) of the Public Health Service Act. Under section 1861(ff) of the Social Security Act, either a hospital or a CMHC may provide partial hospitalization services reimbursable by Medicare.

2. In its response to Petitioner's appeal, HCFA stated that the "CMHC Crucial Data Extract" sheet filed with each Petitioner's application for certification indicated that it was part of another provider, but failed to provide the other provider's Medicare provider number, stating elsewhere that Petitioner was part of a CMHC. HCFA further stated that "[t]his information was nonsensical and state survey agency personnel interpreted these sheets as not constituting a request for provider-based status." HCFA Br. dated 3/19/01, at 2. However, HCFA did not appeal the ALJ's finding that Petitioners requested provider-based status in their initial requests for certification.

3. The ALJ Decision explained by way of background that a facility which is classified as provider-based may be able to claim reimbursement from Medicare for certain otherwise non-reimbursable costs of the provider with which it is found to be integrated. ALJ Decision at 3-4.

4. A notice published on October 3, 2000 delayed the effective date of these regulations and made them applicable for provider cost reporting periods beginning on or after January 10, 2001. 65 Fed. Reg. 58919.

5. One of those reasons, not relevant here, was added in 1997, but is not yet reflected in Part 498.

6. In two later cases, noted but not discussed by Petitioners, where hospitals sought provider-based status for newly-established senior health centers, the ALJ stated that he was providing a hearing at HCFA's insistence without reaching the question of his authority to do so. Baylor University Medical Center, DAB CR701 (2000) and Baylor Medical Center at Richardson, DAB CR702 (2000). Nevertheless, these cases also appear to be distinguishable from the instant cases since the senior health centers would not have qualified as providers of hospital services unless they were classified as provider-based units of the hospital.

7. Petitioners also argued that the new regulations should be applied retroactively in light of what Petitioners characterized as HCFA's inconsistent positions on whether it would consent to hearing resulting in denial of due process and inequitable treatment. P. Br. at 11-12. However, as we discussed above, the cases where HCFA agreed to an ALJ hearing, Johns Hopkins and Memorial Hospital, are distinguishable from Petitioners' cases on their facts.

8. As the ALJ suggested, Petitioner would be entitled to an ALJ hearing on a HCFA determination denying provider-based status that was made after the effective date of the new regulations, provided that the requirements for requesting a hearing were met.