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CASE | DECISION | ANALYSIS | JUDGE | FOOTNOTES

Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
IN THE CASE OF  


SUBJECT: Harriett Cohn Center,

Petitioner,

DATE: March 12, 2002
             - v -
 

Centers for Medicare & Medicaid Services

 

Docket No. A-01-117
Civil Remedies CR797
Decision No. 1817
DECISION
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FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

Harriett Cohn Center (Harriett Cohn) appealed a July 19, 2001 decision by Administrative Law Judge (ALJ) Alfonso J. Montano concluding that the Centers for Medicare & Medicaid Services (CMS) correctly determined that the effective date of Harriett Cohn's certification to participate in Medicare as a community mental health center (CMHC) was December 14, 1998. Harriett Cohn Center, DAB CR797 (2001) (ALJ Decision).(1) The ALJ found that, under the plain language of the applicable regulation at 42 C.F.R. § 489.13(a)(2)(i), the effective date of a CMHC's Medicare certification is the date that CMS signs the provider agreement. Thus, the ALJ granted summary judgment to CMS and upheld the CMS determination.

On appeal from the ALJ Decision, Harriett Cohn argued that this regulation could reasonably be interpreted to provide for a provider agreement retroactive to the date that a CMHC first met all federal requirements for Medicare participation. Harriett Cohn contended that it relied on this interpretation, which it said was supported by a CMS manual provision, and that the effective date of its certification should be March 18, 1998. Harriett Cohn also argued that the CMS interpretation was inconsistent with the federal Administrative Procedure Act and that the effective date resulted from undue delay by CMS and impermissible collections of information.

Based on the analysis below, we conclude that the ALJ's reading of the regulation is neither compelled by the regulatory language nor is it a reasonable reading in light of the history and purpose of the regulation, other regulatory and statutory provisions, and contemporaneous CMS manual provisions. Although we conclude that the effective date should not have been delayed until the date CMS signed the provider agreement, however, we also find that Harriett Cohn is not entitled on the facts of its case to an effective date as early as March 18, 1998.

Our legal conclusions below are relevant primarily for an entity that applied to participate as a CMHC in the Medicare program following the CMS process of providing a statement attesting that it complied with the CMHC statutory definition and with Medicare provider agreement requirements, for which CMS reasonably determined not to accept the attestation statement as satisfactory assurance that the Medicare requirements were met. For such an entity, we determine that the effective date of the provider agreement is the date that both a completed attestation statement was received by CMS and CMS had satisfactory assurance that all Medicare requirements were met.

The facts material in applying these legal conclusions to determine the effective date of participation in Medicare for Harriett Cohn are not in dispute, with the possible exception of issues that would make a difference of only a few days. Thus, rather than remanding this case, we have made a finding as to the effective date of Harriett Cohn's provider agreement which can be supported by the record as it stands. However, either party may request that the Board reopen the decision for the receipt of new evidence with respect to limited factual issues relevant to this finding, consistent with our analysis below. If neither party timely requests reopening pursuant to 42 C.F.R. Part 498, Subpart F, the effective date will be December 10, 1998.

Below, we first provide some general legal and factual background. We then discuss the legal issues. Finally, we apply our legal conclusions to the facts of this case, as they appear on the record before us.

Statutory Background

Section 1832(a)(2)(J) of the Act includes partial hospitalization services provided by a CMHC in the scope of Medicare benefits covered under Part B of title XVIII. The effective date of the CMHC benefit was October 1, 1991. Pub. L. No. 101-508, § 4162 (Nov. 5, 1990).

Section 1861(ff)(1) of the Act defines partial hospitalization services as follows:

The term "partial hospitalization services" means the items and services described in paragraph (2) prescribed by a physician and provided under a program described in paragraph (3) under the supervision of a physician pursuant to an individualized, written plan of treatment established and periodically reviewed by a physician . . . .

Subparagraph (3)(B) states that--

the term "community mental health center" means an entity-

(i) providing the services described in section 1916(c)(4) of the Public Health Service Act; and

(ii) meeting applicable licensing or certification requirements for community mental health centers in the State in which it is located.

The services described in section 1916(c)(4) (now section 1913(c)(1)) of the Public Health Service Act include partial hospitalization services.

Section 1866(a)(1) of the Act states:

Any provider of services . . . shall be qualified to participate under this title and shall be eligible for payments under this title if it files with the Secretary an agreement [meeting specified requirements].

Section 1866(e) of the Act provides that, for purposes of section 1866, the term "provider of services" includes "a community mental health center (as defined in section 1861(ff)(3)(B)), but only with respect to the furnishing of partial hospitalization services . . . ."

Thus, in order to qualify as a CMHC under the Act, an entity must 1) be a provider, i.e., meet all of the definitional requirements for a CMHC, and 2) file an agreement. In addition, the statute contains other requirements that all providers must meet. For example, section 1124 of the Act requires disclosure of ownership information as a condition of an entity's participation in Medicare. See also 42 C.F.R. § 489.12(a)(2).

Section 1866(b)(2) of the Act specifies circumstances in which the Secretary may refuse to enter into an agreement with a provider, including after the Secretary "has determined that the provider fails substantially to meet the applicable provisions of section 1861, . . ." Section 1866(h)(1), as relevant here, provides for a hearing right for "an institution or agency dissatisfied with a determination by the Secretary that it is not a provider of services or with a determination described in subsection (b)(2)." After some decisions were issued holding that the statute provides a hearing right with respect to an initial determination by CMS about the effective date of an agreement, the implementing regulations at 42 C.F.R. Part 498 were amended to specify that a determination by CMS on the effective date of a Medicare provider agreement is an appealable initial determination. 62 Fed. Reg. 43,931, at 43,933, 43,937 (Aug. 18, 1997), adding section 498.3(b)(14) (later renumbered as (b)(15)). Under Part 498, an ALJ provides the hearing and there is a right to request review by the Board of the ALJ decision.

Factual Background

The following background information is drawn from the record before the ALJ, the undisputed assertions of counsel in briefing before the ALJ and the Board, and exhibits admitted by the Board pursuant to 42 C.F.R. § 498.86.

Harriett Cohn is an entity which provides mental health services and is located in Clarksville, Tennessee. Harriett Cohn submitted an initial request for Medicare participation as a CMHC dated October 2, 1997. ALJ Decision at 1, n.1, citing CMS Ex. 2. Harriett Cohn also submitted several forms, including a document captioned "Attestation Statement," which was signed by Harriett Cohn's Chief Executive Officer on October 10, 1997.(2) On the Attestation Statement, Harriett Cohn checked off the statement "The facility meets applicable licensing or certification requirements for community mental health centers in the State in which it is located 1861(ff)(3)(B)(ii)." Harriett Cohn did not check off the statement "The facility is providing the services in section 1916(c)(4) of the Public Health Service Act," nor did it complete the statement that the facility "continues to be in compliance with the applicable requirements [referenced above] effective (Effective date)." CMS submission dated 11/27/01, Att. A, at 3; Harriett Cohn submission dated 12/4/01, Ex. A. These omissions were intentional because at the time that it submitted the Attestation Statement, Harriett Cohn was not yet providing "the core services listed" in section 1916(c)(4) of the Public Health Service Act. According to Harriett Cohn, it provided such services beginning March 18, 1998. Harriett Cohn submission dated 12/4/01, at 8 and Ex. A.

In May 1998, the fiscal intermediary that was later designated as Harriett Cohn's fiscal intermediary performed an on-site review of Harriett Cohn. Another on-site review was performed by a subcontractor of the fiscal intermediary in July 1998. Request for Administrative Law Judge Hearing, dated 5/7/99, at 1; CMS submission dated 11/27/01, at 10. The first review found that Harriett Cohn was providing the services described in the Public Health Service Act and met Tennessee licensing requirements applicable to CMHCs, but the second review found that Harriett Cohn was not providing all of the services described in the Public Health Service Act. CMS submission dated 11/27/01, at 10.

By letter dated November 20, 1998 addressed to Harriett Cohn's chief executive officer, CMS acknowledged receipt of Harriett Cohn's request for participation. (The record does not indicate why Harriett Cohn's request was not acknowledged earlier.) The letter stated that CMS had determined that certain information was missing or incomplete, and requested that as soon as possible Harriett Cohn: 1) complete the Attestation Statement to show the date that the facility began providing the services; 2) submit contracts for staff services provided under arrangement; 3) describe how and where each of the categories of services is furnished; 4) specify Harriett Cohn's incorporation date; 5) provide notarized copies of various documents (licenses for health care professionals, business license or liability insurance policies, and lease agreement or proof of ownership of property where services are furnished); and 6) explain the relationship to Harriett Cohn of other facilities named on patient records since none of these facilities were mentioned on the Disclosure of Ownership and Control Interest Statement. CMS submission dated 11/27/01, Att. A at 1-2; Harriett Cohn submission dated 12/4/01, Ex. B, at 1.

Harriett Cohn responded to CMS's letter by letter dated December 4, 1998, including with its response a "corrected" attestation statement. CMS submission dated 11/27/01, at 12. On December 10, 1998, CMS telephoned Harriett Cohn to request clarification of two matters addressed in Harriett Cohn's response: 1) the location of Harriett Cohn's partial hospitalization program, and 2) how Harriett Cohn delivered the core services in Montgomery County. Id. at 12-13.(3) Harriett Cohn responded by letter dated December 11, 1998 (id. at 13), also returning to CMS a provider agreement form signed by Harriett Cohn on the same date (CMS Ex. 4). (The record does not indicate when CMS sent the provider agreement form to Harriett Cohn.) The provider agreement form indicates that it was signed by the Associate Regional Administrator of CMS on December 14, 1998.

By letter dated December 14, 1998, CMS notified Harriett Cohn of its certification as a CMHC, effective December 14, 1998. CMS Ex. 3. By letter dated March 11, 1999, CMS denied Harriett Cohn's request for reconsideration of the December 14, 1998 effective date, citing as authority section 2004 of CMS's State Operations Manual. CMS Ex. 5.

Harriett Cohn requested an in-person evidentiary hearing pursuant to 42 C.F.R. Part 498. However, in a decision dated July 19, 2001, the ALJ granted CMS's motion for summary disposition, finding that there were no disputed issues of material fact in the case. The ALJ concluded that the "plain meaning of 42 C.F.R. § 489.13(a)(2)(i) is that the effective date of the certification of a CMHC is the date that CMS accepts an entity's signed agreement." ALJ Decision at 7. The ALJ stated that, in view of this conclusion, he did not need to reach Harriett Cohn's argument that CMS improperly relied on the manual provision it cited as authority for its effective date determination. The ALJ also stated that he had no authority to decide whether CMS published section 489.13(a)(2)(i) in violation of the Administrative Procedure Act or whether that regulation is arbitrary and capricious.

ANALYSIS
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Our standard of review on a disputed conclusion of law is whether the ALJ decision is erroneous. Our standard of review on a disputed finding of fact is whether the ALJ decision is supported by substantial evidence on the record as a whole. Guidelines for Appellate Review of Decisions of Administrative Law Judges Affecting a Provider's Participation in the Medicare and Medicaid Programs; see also National Behavioral Center, Inc., DAB No. 1760 (2001), applying Hillman Rehabilitation Center, DAB No. 1611 at 6 (1997), aff'd, Hillman Rehabilitation Center v. HHS, No. 98-3789 (GEB) at 21-38 (D.N.J. May 13, 1999).

For the reasons explained below, we conclude that the ALJ erred in concluding that the applicable regulations require that the effective date of a CMHC's Medicare certification be the date CMS signs a provider agreement. We then proceed to make new findings regarding the effective date here based on the record before us.

1. The ALJ erred in concluding that the plain meaning of the regulation is that the effective date of a CMHC's Medicare certification is the date CMS signs a provider agreement.

The applicable effective date rule is at 42 C.F.R. § 489.13, captioned "Effective date of agreement or approval," which went into effect on September 17, 1997. Section 489.13(a)(2)(i) provides that-

[f]or an agreement with a community mental health center (CMHC) or a Federally qualified health center (FQHC), the effective date is the date on which HCFA accepts a signed agreement which assures that the CMHC or FQHC meets all Federal requirements.

As noted above, the ALJ concluded that the plain meaning of this provision is that the effective date of a CMHC's Medicare certification is the date CMS signs a provider agreement. To reach this conclusion, the ALJ read "accepts" as meaning "signs." While CMS's signing a provider agreement is evidence that CMS has accepted the agreement, however, "accepts" is not synonymous with "signs." Thus, the ALJ erred in determining the "plain meaning" of section 489.13(a)(2)(i), which we conclude instead is ambiguous. It is therefore appropriate to examine this provision in the context of its history and purpose, other regulatory and statutory provisions, and contemporaneous manual provisions issued by CMS.

2. The regulatory history and purpose support a different reading.

The history of the effective date provision is instructive because there is no evidence that CMS ever intended to make a substantive change to the prior version of the regulation, the meaning of which is clear. The prior version of section 489.13 was issued as an interim final rule in 1994. It provided in pertinent part:

(c) Community mental health center (CMHC). The effective date of a provider agreement with a CMHC is determined as follows:

* * * *

(2) Request for Medicare participation received after June 30, 1992. The agreement is effective on the date the CMHC meets all federal requirements, but not before the date HCFA receives the application.

CMS explained the meaning of this provision in the preamble to the interim final rule as follows:

[T]he effective date of [a CMHC's] provider agreement is based on receipt of its request to participate in Medicare and compliance with all Federal requirements. . . . For requests for Medicare participation received after June 30, 1992, the agreement is effective on the date the CMHC meets all Federal requirements but not before the date HCFA receives the application.

59 Fed. Reg. 6570, 6575 (Feb. 11, 1994). The preamble also explained that CMS was in the process of developing a provider agreement specific to a CMHC and specified an interim process for requesting to participate in Medicare:

In the interim, if a CMHC desires to participate in the Medicare program, it must submit a letter requesting approval as a CMHC. This letter requesting approval as a CMHC is considered an official application and must be accompanied by a signed attestation statement that the CMHC complies with all Federal requirements described in section 1861(ff)(3)(B) of the Act and conforms to the provisions of section 1866 of the Act concerning Medicare provider agreements. If HCFA determines that the CMHC meets all Federal requirements, the CMHC receives notification of approval and the CMHC is assigned a provider number.

Id. at 6574. Thus, prior to the 1997 amendment of section 489.13, an entity could apply to participate in Medicare as a CMHC by submitting an application including a statement attesting that it complied with the requirements of section 1861(ff)(3)(B) for CMHCs as well as the requirements in section 1866 concerning the agreement which must be filed. If the entity in fact complied with these requirements, its agreement would be effective on the date CMS received the application.

Although the 1997 regulation altered the wording of section 489.13, CMS never stated that it was changing the effective date rule for CMHCs. The preamble to the notice of proposed rulemaking did not mention the effective date rule for CMHCs at all, much less state that CMS intended to make a substantive change in the earlier rule. Furthermore, as discussed below, CMS itself interpreted section 489.13 in a manner consistent with the earlier version of that regulation even after the regulation was amended in 1997. Thus, it is reasonable to conclude that CMS did not intend to change its policy with respect to a CMHC's effective date when it promulgated section 489.13(a)(2)(i).

Indeed, to conclude otherwise would mean that CMS violated the Administrative Procedure Act (APA), 5 U.S.C. § 552 et seq., in effecting such a change. Section 553(c) requires that when a federal agency adopts, amends or repeals a rule, the agency must publish notice of the proposed change in the Federal Register and give interested persons "an opportunity to participate in the rulemaking through the submission of written data, views, or arguments."(4) Courts have consistently held that agency rules are invalid if an agency fails to comply with the APA's notice and comment rulemaking requirements. New York State Dept. of Social Services, DAB No. 1701, at 22 (1999), and court decisions cited therein. Section 553(b) provides an exception to the notice and comment rulemaking requirement for "interpretative rules, general statements of policy, and rules of agency organization, procedure, or practice." This exception is not applicable here, however, since section 489.13 does not merely interpret or clarify the statute but creates law that affects the rights of prospective providers. Accordingly, an interpretation of section 489.13(a)(2)(i) that is consistent with the meaning of the previous regulation avoids a potential challenge to the validity of section 489.13(a)(2)(i) on APA grounds.(5)

The placement of section 489.13(a)(2)(i) within the 1997 effective date regulation is also significant. Section 489.13(a)(2)(i) appears as an exception to a general rule providing that the effective date of an agreement with a prospective provider is the date that a certification survey is completed "if on that date the provider . . . meets all applicable Federal requirements" (42 C.F.R. § 498.13(b)), and that if the provider fails to meet any requirements as of that date, the agreement will be effective on the date when the provider "meets all requirements" or has lower level deficiencies for which an acceptable plan of correction is submitted (42 C.F.R. § 489.13(c)(2)). The preamble to the final rule stated that "[t]his rule establishes uniform criteria for determining the effective dates of Medicare and Medicaid provider agreements . . . when the provider . . . is subject to survey and certification." 62 Fed. Reg. 43,931 (Aug. 18, 1997).

According to CMS, the exception for CMHCs was necessary because CMHCs are not subject to survey and certification. While CMS is correct that CMHCs are not subject to the process for survey and certification in 42 C.F.R. Part 488, this does not mean that we should read the regulation to place CMHCs in a worse position than providers that are. Instead, it makes more sense to view the meaning of the exception in light of what CMS had said before, that is, that its interim process permitted an effective date based on receipt of the application (including an attestation that all requirements are met) based solely on approval of that application, with no requirement for a survey. This view of the exception is more consistent with the overall intent of the rule that prospective providers be treated uniformly. Under the ALJ's interpretation, this intent could be easily frustrated: if CMS delays the ministerial function of signing the provider agreement for any length of time after verifying that a CMHC meets all federal requirements for participation, this would delay the effective date of the provider agreement, whereas other types of providers are entitled to an effective date as of the date a survey finds them to meet all federal requirements, even if CMS takes time to review that survey to determine whether it agrees with the findings.

3. The ALJ's interpretation is inconsistent with the regulatory provision for a hearing on the effective date of a provider agreement.

The ALJ determined that, pursuant to section 489.13(a)(2)(ii), the date of CMS's signature on the provider agreement controlled since the ALJ read "accepts" as meaning "signs." The ALJ therefore determined that Harriett Cohn was not entitled to a hearing to show that in fact CMS had accepted the provider agreement on an earlier date. Under 42 C.F.R. § 498.3(b)(15) (which implements section 1862(h)(1) of the Act), however, a determination by CMS on the effective date of a provider agreement is an appealable determination. The ALJ's interpretation of section 489.13(a)(2)(ii) was inconsistent with this right to appeal because it precluded review of the date set by CMS. For the statutory and regulatory hearing right to be meaningful, the ALJ must have the authority to determine when the provider agreement is effective based on the facts of the case before him as determined after a hearing. Thus, the effective date provision for CMHCs--like the effective date provisions for other providers--is properly read as specifying how CMS will make an initial determination on an effective date rather than as specifying what that date will be irrespective of any findings on appeal.

CMS took the position that there was a meaningful appeal right under the ALJ's interpretation of section 489.13(a)(2)(i) since, even under that interpretation, an ALJ has authority to determine whether CMS "abused its discretion" in making the effective date determination. CMS submission dated 11/27/01, at 2. However, the statute and regulations contemplate effective date determinations made based primarily on factual findings (in which discretion plays no part) about whether a prospective provider meets the relevant definition and other requirements and has filed a provider agreement. Moreover, CMS defined the scope of its discretion so broadly as to preclude any meaningful review.(6)

4. CMS's reliance on the regulatory provision regarding acceptance of a provider as a participant is misplaced.

In support of its effective date determination here, CMS also relied on section 489.11, which provides:

(a) Action by HCFA. If HCFA determines that the provider meets the requirements, it will send the provider-

(1) Written notice of that determination; and
(2) Two copies of the provider agreement.

(b) Action by provider. If the provider wishes to participate, it must return both copies of the agreement, duly signed by an authorized official, to HCFA . . . .

(c) Notice of acceptance. If HCFA accepts the agreement, it will return one copy to the provider with a written notice that-

(1) Indicates the dates on which it was signed by the provider's representative and accepted by HCFA;
(2) Specifies the effective date of the agreement.

While the 1994 preamble stated that the provisions of section 489.11 apply to CMHCs, the preamble went on to state that CMS was "in the process, however, of developing a new provider agreement specific to a CMHC" and to describe what the interim process would be. 59 Fed. Reg. 6570, 6574 (Feb. 11, 1994). That interim process, which was to be in effect until CMS's development of a provider agreement for CMHCs, permitted a statement attesting that the applicable requirements (including the requirements of section 1866) were met to function both as a basis for a determination of compliance and as the agreement required by section 1866. Section 489.11, on the other hand, sets out a process whereby CMS would send a "provider agreement" for signature only after determining that all applicable requirements were met. Thus, it is unclear whether section 489.11 was intended to govern prior to the time that CMS had a provider agreement specific to CMHCs. CMS did not allege that it had put into place a provider agreement for CMHCs during the time in question here, and the one in the record (at CMS Exhibit 4) is not specific to a CMHC. CMS submission dated 11/27/01, at 7-10.

In any event, it is significant that section 489.11 states that the notice of acceptance will indicate the date on which the agreement was "signed" by the provider and "accepted" by HCFA (CMS). The use of different terminology for the two actions is evidence that CMS did not intend to require that the date accepted must be the date CMS signs the agreement.

5. CMS's reliance on section 2004 of the State Operations Manual is misplaced.

As authority for its determination that the effective date provision for CMHCs refers to the date CMS signs a provider agreement, CMS pointed to section 2004 of its State Operations Manual (SOM). That provision, which was issued in September 1998, states in pertinent part that "[s]ince there are not any Medicare conditions for CMHCs . . ., the effective date is the date the [Regional Office] signs the provider agreement, after determining that all Medicare requirements, including enrollment are met." SOM § 2004.A (CMS Ex. 1).

Although CMS cited SOM § 2004 in its reconsideration letter and before the ALJ, CMS later agreed with the ALJ Decision that it was unnecessary to rely on this provision in view of the plain meaning of the regulation. CMS nevertheless asserted that SOM § 2004 reflected the "most logical reading" of the regulation and that CMS's application of this provision to a pending request for participation "could only be viewed as prospective, not impermissibly retrospective." CMS submission dated 10/24/01, at 22, 29.

Even if CMS is correct that application of SOM § 2004 would be prospective, however, we conclude that the interpretation in this provision is erroneous and unreasonable since it is inconsistent with other SOM provisions that were issued closer in time to the 1997 effective date regulation (some of which are still in effect). These provisions, like the preamble to the 1994 regulation, tie the effective date of the provider agreement to the date CMS received an application including an attestation that the CMHC meets all federal requirements. Specifically, section 2252.E. of the SOM, which was in effect until January 2001, provided that-

[t]he effective date of the provider agreement for CMHCs that request Medicare participation on or after July 1, 1992, is the date that all Federal requirements are met. Usually this is the date the [state agency] receives an attestation from the potential CMHC that all requirements are met if it certifies that all Federal requirements are met on that date.

CMS Ex. 6, at 2.(7)

Moreover, since March 1998, the SOM has included a "Model Letter to Entity Seeking Participation in Medicare As a Community Mental Health Center (CMHC) Providing Partial Hospitalization Services" which provides in pertinent part:

The effective date of the agreement for the CMHC benefit will be the date that we receive attestation from you that all Federal requirements are met if we concur and certify that your facility is determined to meet the Federal requirements on that date. . . .

SOM Ch. 9, Ex. 130.

Since March 1998, the SOM has also included an effective date provision pertaining to Federally Qualified Health Centers (FQHCs) which provides:

The earliest effective date of a FQHC's approval will be the date the RO receives the signed attestation statement and the FQHC attests in writing that it meets all the Federal requirements in the FQHC regulation. The FQHC may select a date subsequent to the date the RO receives this attestation if it meets all of the Federal requirements on the date selected. If all Federal requirements are not met on the date selected, the effective date will be the date the RO determines that the facility meets the Federal requirements and approves its FQHC agreement (attestation statement).

SOM § 2826.H. Since section 489.13(a)(2)(i) applies to both CMHCs and FQHCs, CMS may not reasonably interpret that provision differently for CMHCs than for FQHCs, without some basis for a distinction.

Moreover, SOM § 2004 is based on the incorrect premise that "there are not any Medicare conditions for CMHCs." The term "conditions of participation" is defined at 42 C.F.R. § 488.1 as "the requirements providers other than skilled nursing facilities must meet to participate in the Medicare program . . . ." Clearly, the requirements in the definition of a CMHC, incorporated by reference into section 1861(ff) of the Act, are a prerequisite to such participation.(8) Thus, CMS could not justify treating CMHCs differently from other providers on the ground that there are no conditions of participation for CMHCs.

6. Where an entity does not give adequate assurance in its initial application to participate as a CMHC that all federal requirements are met, section 489.13(a)(2)(i) is most reasonably read as providing for an effective date at the earliest date on which CMS had received an application including a complete attestation statement and had satisfactory assurance that all of the requirements were met.

We concluded above that section 489.13(a)(2)(i) must be read to permit an effective date based on receipt of the application for Medicare participation (including an attestation statement that all requirements are met). At issue here, however, is what the effective date should be when the prospective provider does not give adequate assurance with the initial application that all requirements are met and CMS determines to have surveys done and then to request further information. As applied to entities using the CMS attestation procedure for CMHCs for whom CMS determined that it needed more information, we conclude that the phrase in the regulation "the date on which HCFA accepts a signed agreement" must be read to mean the date on which both an application including a complete attestation had been received and CMS had satisfactory assurance that all requirements are met. It is simply not reasonable to think that CMS would accept an attestation as controlling even where CMS had reason to believe that the applicable requirements were not met. Indeed, the manual provision on which Harriett Cohn said it relied, SOM § 2252.E., stated that the effective date of a CMHC's provider agreement "usually" is the date an attestation is received that all requirements are met. This implies that there are circumstances under which receipt of such an attestation may not be sufficient.

Moreover, as discussed above, there are conditions of participation for CMHCs, including requirements that apply to all prospective providers. CMS clearly has the authority (and indeed the duty) to perform surveys or to request information if that is necessary in order to have satisfactory assurance that a prospective provider complies with these requirements.(9)

Finally, reading section 489.13(a)(2)(i) to provide for an effective date at the earliest date on which CMS had received an application including a complete attestation and had satisfactory assurance that all of the requirements were met both protects the entity applying for participation from CMS unfairly delaying its acceptance and protects the program and its beneficiaries from entities that have not provided satisfactory assurance that they meet applicable requirements.

7. The ALJ did not err in rejecting Harriett Cohn's assertion that the effective date of its provider agreement should be March 18, 1998.

Harriett Cohn argued for an effective date of March 18, 1998 on the ground that that was the date on which it began to provide the services in section 1916(c)(4) of the Public Health Service Act, as required to meet the definition of a CMHC in section 1861(ff)(3)(B) of the Act. Even if Harriett Cohn met the definitional requirements for a CMHC on that date, however, we would conclude that this was not sufficient.

As noted earlier, in order to qualify as a CMHC under the Act, an entity must not only meet all of the definitional requirements for a CMHC but must also file an agreement. It was reasonable for Harriett Cohn to submit an attestation in lieu of a provider agreement. As already noted, the preamble to the 1994 regulations (the meaning of which we concluded was unchanged by the 1997 amendment to the effective date rule) stated that "a signed attestation statement that the CMHC complies with all Federal requirements described in section 1861(ff)(3)(B) of the Act and conforms to the provisions of section 1866 of the Act concerning Medicare provider agreements" could be utilized in lieu of a provider agreement, as part of an application to participate, until CMS developed a new provider agreement specific to a CMHC. 59 Fed. Reg. 6570, 6575 (Feb. 11, 1994). There is no indication in the record that CMS developed a provider agreement specific to a CMHC during the time in question here. Moreover, in March 1998, CMS issued the three SOM provisions quoted above (two of which continue in effect) tying a CMHC's effective date to the date of receipt of an attestation that the entity is meeting all federal requirements.

However, the attestation initially submitted by Harriett Cohn (signed on October 10, 1997) was incomplete on its face since Harriett Cohn did not check off the part of the attestation indicating that it was providing all of the required services or fill in the effective date of its compliance. In addition, CMS later identified other information that was missing from Harriett Cohn's application form, such as information about facilities named on patient records but not mentioned on the Disclosure of Ownership and Control Interest Statement that was required to establish compliance with section 1124 of the Act.(10) Yet, Harriett Cohn did not give a date by which it said it would meet all of the requirements, nor apparently take any steps on its own to complete the application, even after March 18, 1998, the date Harriett Cohn later said it was providing the required services. Thus, in light of the incompleteness of Harriett Cohn's application, Harriett Cohn had no reasonable basis for believing that it would receive Medicare payments as of the date it first started providing all of the required services.

On the other hand, CMS was reasonable in determining that more information was needed to complete Harriett Cohn's application. As just stated, Harriett Cohn's initial attestation did not even assert that Harriett Cohn met all the Medicare requirements as of the date the attestation was submitted. Moreover, some of the information missing from Harriett Cohn's application was not related to whether Harriett Cohn was providing all of the services required to meet the definition of a CMHC, but instead related to other title XVIII requirements, such as disclosure of ownership. Harriett Cohn had notice through the statute and regulations that this disclosure was required. Also, the on-site review performed in July 1998 raised questions about whether Harriett Cohn was providing all of the services required to meet the definition of a CMHC. Thus, CMS acted reasonably in requesting that Harriett Cohn submit further information in order to provide satisfactory assurance that all Medicare requirements were met.(11)

8. On the record before us, we find that Harriett Cohn had provided satisfactory assurance to CMS by December 10, 1998, prior to the date CMS signed the provider agreement form.

CMS determined the effective date of Harriett Cohn's provider agreement based on the date the CMS Regional Administrator signed the provider agreement form (CMS Exhibit 4) that CMS sent to Harriett Cohn for signature. Relying on this form as the provider agreement for Harriett Cohn, however, ignored the fact that Harriett Cohn eventually completed its application by submitting a corrected attestation statement. As discussed above, CMS policy contemplated that the requirement in section 1866(a)(1) of the Act to file an agreement could be satisfied upon CMS's receipt of an application including a complete attestation statement. That requirement was satisfied here when CMS received the corrected attestation statement that was mailed by Harriett Cohn to CMS on December 4, 1998.

It is clear from the record that CMS received Harriett Cohn's corrected attestation statement no later than December 10, 1998, since this was the date CMS telephoned Harriett Cohn to request clarification of information submitted by Harriett Cohn with the attestation statement. If Harriett Cohn also met all of the definitional requirements in section 1861(ff)(B)(3) of the Act by the time CMS received Harriett Cohn's corrected attestation statement and additional information, then Harriett Cohn would be entitled to a slightly earlier effective date than if the effective date was based on the signing of the provider agreement form by the CMS Regional Administrator.

CMS did not identify the date it believed Harriett Cohn first met all of the requirements for a CMHC. On the record before us, we have no reason to conclude that it was later than the date CMS received Harriett Cohn's corrected attestation statement. Although CMS requested additional information from Harriett Cohn on or after that date, it appears that the additional information pertained to where and how certain services were delivered, not whether Harriett Cohn in fact met the requirements.

Since resolution of these issues of fact would make a difference of only a few days, rather than remand the case to the ALJ, we find that the record as it stands would support an effective date of December 10, 1998. However, either party may request that the Board reopen this decision pursuant to 42 C.F.R. Part 498, Subpart F, to receive new evidence with respect to the limited factual issues of 1) when CMS received the corrected attestation statement from Harriett Cohn, or 2) when Harriett Cohn met all of the requirements for a CMHC, if resolution of these issues might result in an earlier or later effective date. If neither party timely requests reopening, then the effective date will be December 10, 1998.

Conclusion

For the foregoing reasons, we conclude that the ALJ erred in finding that, pursuant to 42 C.F.R. § 489.13(a)(2)(i), the effective date of Harriett Cohn's provider agreement was December 14, 1998, and we find instead that the effective date was December 10, 1998.

JUDGE
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Cecilia Sparks Ford

Marc R. Hillson

Judith A. Ballard
Presiding Board Member

FOOTNOTES
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1. CMS was previously named the Health Care Financing Administration (HCFA). See 66 Fed. Reg. 35,437 (July 5, 2001). We use "CMS" in this decision unless we are quoting documents that refer to HCFA.

2. CMS's copies of the October 2, 1997 request and the October 10, 1997 Attestation Statement and other forms submitted by Harriett Cohn bear a date stamp of October 21, 1997, which may be the date these documents were received by CMS.

3. Harriett Cohn alleged that CMS requested information from it on December 7, 1998. CMS stated, however, that it had no record of such a request. CMS submission dated 11/27/01, at 12.

4. Section 553(a)(2) exempts matters relating to benefits from these procedural requirements; however, the Department of Health and Human Services (then the Department of Health, Education and Welfare) stated in a notice published in the Federal Register on February 5, 1971 (36 Fed. Reg. 2532) that it was waiving this exemption and would require public participation in accordance with the APA when formulating rules. Moreover, section 1871(a)(2) of the Act provides that "[n]o rule, requirement, or other statement of policy . . . that establishes or changes a substantive legal standard governing . . . the eligibility of individuals, entities, or organizations to furnish or receive services or benefits under this title shall take effect unless it is promulgated by the Secretary by regulation . . . ." Section 1871(b)(1) provides for a notice of proposed rulemaking with an opportunity for public comment thereon before a regulation is issued in final form.

5. While CMS and the ALJ are correct that we do not have the authority to declare the Secretary's regulation to be invalid, this does not preclude us from considering arguments about validity when interpreting an ambiguous regulation.

6. CMS stated that section 489.13(a)(2)(i) "predicates a CMHC's effective date upon CMS' performance of a discretionary act - its decision to accept the facility's provider agreement. Accordingly, the Board lacks authority to direct CMS to perform a task within a specified period of time when performance of the task in question falls within CMS' discretion." CMS submission dated 10/24/01, at 36. Further, according to CMS, "there is absolutely no statutory or regulatory authority which requires CMS to decide to accept a prospective CMHC's provider agreement by a date certain. . . . [I]n the absence of such authority, the Board should recognize the ample discretion afforded CMS by 42 C.F.R. § 489.13(a)(2)(i) and leave the effective date determination in this case undisturbed." Id.

7. Harriett Cohn alleged that this provision was in effect in October 1997 when Harriett Cohn first submitted its request to participate in Medicare. Although CMS did not dispute this assertion, we could not independently verify it, and the provision on its face shows a date of March 1998.

SOM § 2252 was revised on January 9, 2001 to state that "[t]he date [Regional Office] signs off on the provider agreement will be the CMHC's effective date." SOM § 2252.D.

8. Contrary to what CMS argued, a recent amendment to section 1861(ff) does not support the view that there are no "conditions" of participation for CMHCs. That amendment added language, effective March 1, 2001, providing that a CMHC "meets such additional conditions as the Secretary shall specify" to ensure certain specified goals. Pub. L. No. 106-554, § 431. CMS's argument ignores the word "additional," which clearly implies that Congress thought some conditions were already established by statute.

9. Notwithstanding a contrary statement in the preamble to the 1994 regulation, CMS recognized this in SOM § 2252.D., which stated: "Facilities that apply for Medicare approval as CMHCs for purposes of providing partial hospitalization services are not subject to routine initial surveys. However, these prospective facilities . . . may be subject to an onsite survey at the discretion of HCFA or the State to determine if the requirements in § 1861(ff) and § 1866 are met." See also SOM § 2252.H. Furthermore, CMS's authority to survey or otherwise seek assurance that all title XVIII requirements are met is implicit in the Act. Section 1866(b)(2)(B) of the Act permits CMS to refuse to enter into an agreement if the prospective provider does not meet the requirements of section 1861 (which incorporates by reference the definition of a CMHC). See also 42 C.F.R. § 489.12(a)(3) (permitting CMS to refuse to enter into an agreement if the prospective provider "is unable to give satisfactory assurance of compliance with the requirements of title XVIII of the Act"). Even where a state agency certifies that an entity meets the requirements of section 1861, section 1864(a) of the Act provides that the Secretary may rely on the certification "[t]o the extent that the Secretary finds it appropriate . . . ." See also 42 C.F.R. § 488.12 (providing that "[c]ertifications by the State survey agency represent recommendations" to CMS on the basis of which CMS will determine whether a provider is eligible to participate in the Medicare program). Cf. Big Bend Hospital Corp., d/b/a Big Bend Medical Center, DAB No. 1814, at 8-10 (2002).

10. Harriett Cohn asserted that CMS's requests for information, as well as the on-site surveys by the fiscal intermediary and its contractor, were made in violation of the Paperwork Reduction Act (PRA). The PRA provides generally that a federal executive agency "shall not conduct or sponsor [a] collection of information" unless the agency has obtained approval from the Office of Management and Budget (OMB) and an OMB control number for display on the collection of information. 44 U.S.C. § 3507(a). Harriett Cohn argued that, "[b]ut for the unauthorized collections of information, [the] provider agreement would have been signed earlier." Harriett Cohn submission dated 9/23/01, at 13. However, even assuming there was a violation of the PRA, this is not a basis for finding an earlier effective date. Harriett Cohn initially sought to be certified on the basis of its request for participation and attestation statement, not on the basis of the provider agreement form (which in any event Harriett Cohn did not sign until December 11). Since the attestation statement Harriett Cohn initially submitted was incomplete on its face and Harriett Cohn took no steps on its own to submit a corrected attestation statement, CMS's possibly unauthorized request for a corrected attestation statement resulted in an earlier, not a later, effective date than Harriett Cohn would have had in the absence of this request.

11. In light of Harriett Cohn's own admitted failure to submit a completed application, we reject Harriett Cohn's reliance on an internal CMS e-mail as indicating that Harriett Cohn was caught in an arbitrary "hold status" through no fault of its own. See Harriett Cohn submission dated 9/23/01, at 15.

CASE | DECISION | ANALYSIS | JUDGE | FOOTNOTES