SUBJECT: Forest Glen Skilled Nursing &
Rehabilitation Center,

Petitioner,

Centers for Medicare & Medicaid Services

FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION

Petitioner, Forest Glen Skilled Nursing & Rehabilitation Center (Forest Glen), requested review of an August 20, 2002 decision by Administrative Law Judge (ALJ) Steven T. Kessel. Forest Glen Skilled Nursing & Rehabilitation Center, DAB CR943 (2002) (ALJ Decision). The ALJ Decision granted the request by the Centers for Medicare & Medicaid Services (CMS) for summary judgment and affirmed the CMS determination that January 28, 2002 was the earliest effective date of Forest Glen's provider agreement permitting it to participate in the Medicare Program as a skilled nursing facility (SNF).

Based on the analysis below (which differs in some respects from the ALJ's analysis), we conclude that, under the applicable regulations, read in context, January 28 is the earliest permissible effective date of Forest Glen's provider agreement. Accordingly, we affirm the ALJ Decision, as modified below.

Legal Background

Under section 1866 of the Social Security Act (Act), providers of services seeking to participate in Medicare must enter into an agreement with the Secretary. Generally, in order to enter into a provider agreement, an entity must first be surveyed by CMS or a state survey agency to ascertain whether it complies with applicable conditions of or requirements for participation. ⁽¹⁾ See section 1864 of the Act. Section 1819(g) of the Act describes the survey and certification process for SNFs seeking to participate in Medicare.

Procedures for survey and certification of long term care facilities (including SNFs and nursing facilities) are set out in regulations at 42 C.F.R. Part 488, subpart A and E, and in the State Operations Manual (SOM) issued by CMS. A state survey agency failure to follow survey procedures, however, "does not relieve a [facility] of its obligations to meet all requirements for program participation or invalidate adequately documented deficiencies." 42 C.F.R. § 488.318(b); see Golden State Manor and Rehabilitation Center, DAB No. 1597 (1996)(Golden State Manor).

To participate in Medicare as a skilled nursing facility (SNF), a facility must meet the statutory requirements in section 1819 of the Act. Section 1819(d)(2)(B) of the Act provides:

A skilled nursing facility must meet such provisions of the Life Safety Code of the National Fire Protection Association as are applicable to nursing homes; except that-

(i) the Secretary may waive, for such periods as he deems appropriate, specific provisions of such Code which if rigidly applied would result in unreasonable hardship upon a facility, but only if such waiver would not adversely affect the health and safety of residents or personnel, and

(ii) the provisions of such code shall not apply in any State if the Secretary finds that in such State there is in effect a fire and safety code, imposed by State law, which adequately protects residents of and personnel in skilled nursing facilities.

Regulations on participation requirements for long term care facilities are at 42 C.F.R. Part 483. They include the general requirement at section 483.70(a) that a facility meet Life Safety Code (LSC) requirements and a provision at section 483.70(a)(2) for waiver of specific provisions of the LSC by CMS "[a]fter consideration of State survey agency findings" where the statutory waiver requirements are met. ⁽²⁾ They also provide that the LSC provisions do not apply in a state where CMS has found that a fire and safety code imposed by state law adequately protects patients, residents and personnel in long term care facilities. 42 C.F.R. § 483.70(a)(3). The scope section of part 483 states that the provisions of that part "serve as the basis for survey activities for the purpose of determining whether a facility meets the requirements for participation in Medicare and Medicaid." § 483.1(b).

If, based on a survey, a state survey agency certifies that an SNF is in compliance with federal requirements, the certification is subject to approval by CMS. 42 C.F.R. § 488.330; see also 42 C.F.R. § 489.10(d).

Provisions in 42 C.F.R. § 489.13 on the effective date of a provider agreement were revised in 1997 to establish uniform criteria for determining the effective dates of provider agreements when the provider is subject to survey and certification as a basis for determining participation in Medicare and Medicaid. 62 Fed. Reg. 43,931. Section 489.13(a) explains that, except as provided in subsection (a)(2) for community mental health centers, the section applies to Medicare provider agreements with entities that are "subject to survey and certification by CMS or the State survey agency" or are "deemed to meet Federal requirements on the basis of accreditation" by an approved accreditation program. Subsection (d) applies when an accredited supplier or provider applies to participate in the program. Subsections (b) and (c) provide, as relevant here:

(b) All Federal requirements are met on the date of survey. The agreement . . . is effective on the date the survey (including the Life Safety Code survey, if applicable) is completed, if on that date the provider . . . meets all applicable Federal requirements as set forth in this chapter. . . .

(c) All Federal requirements are not met on the date of survey. If on the date the survey is completed the provider . . . fails to meet any of the requirements specified in paragraph (b) of this section, the following rules apply:

(1) For an agreement with an SNF, the effective date is the date on which-

(i) the SNF is in substantial compliance (as defined in
§ 488.301 of this chapter) with the requirements for participation; and

(ii) [CMS] or the State survey agency receives from the SNF, if applicable, an approvable waiver request.

(Emphasis added.) "Substantial compliance" is defined as "a level of compliance with the requirements of participation such that any identified deficiencies pose no greater risk to resident health or safety than the potential for causing minimal harm." 42 C.F.R. § 488.301. In the preamble to regulations on survey and certification of long term care facilities, CMS stated:

Waiving requirements renders those requirements not applicable to a particular facility for the duration of the waiver. If requirements are not applicable to a particular facility, that facility cannot be out of compliance with those requirements. Therefore, when a facility has been granted a waiver of certain requirements, there would be no remedy imposed, nor would those waived requirements be considered when looking at a pattern of repeated noncompliance.

59 Fed. Reg. 56,116; 56,154.

Prior to 1997, the appeals procedures at 42 C.F.R. Part 498 did not specifically provide that a CMS determination about the effective date of a provider agreement was an appealable initial determination. ⁽³⁾ The 1997 revisions added section 498.3(b)(14), specifying that a determination about effective date is an initial determination. The same revisions added a provision stating that a "State survey agency's decision as to when to conduct an initial survey of a prospective provider" is not subject to appeal. 42 C.F.R. § 498.3(d)(15).

The ALJ Decision and Forest Glen's exceptions

The ALJ Decision was based on four findings of fact and conclusions of law (FFCLs). Forest Glen did not take exception to FFCL 1, in which the ALJ concluded that Summary Disposition was appropriate in this case. Accordingly, we affirm and adopt FFCL 1. Forest Glen did except to FFCLs 2, 3 and 4. Those FFCLs provided as follows:

FFCL 2. Petitioner became eligible to participate in Medicare on January 28, 2002, the date when it completed surveys establishing that it met all participation requirements, including the requirements of the Life Safety Code.

FFCL 3. I have no authority to order CMS to waive the requirements of 42 C.F.R. § 489.13(b) and to order that it certify Petitioner to participate at a date that is earlier than January 28, 2002.

FFCL 4. I have no authority to order that Petitioner be certified to participate in Medicare before January 28, 2002 based on equitable considerations.

The ALJ Decision found that the following facts were undisputed:

Petitioner is a skilled nursing facility located in Maryland. Formerly, it was known as Sylvan Manor Health Care Center, LLC, d/b/a/ Forest Glen Skilled Nursing & Rehabilitation Center, and it participated in Medicare pursuant to a provider agreement between CMS and an entity known as Care Matrix/Forest Glen.

On November 9, 2000, Care Matrix/Forest Glen filed for Chapter 11 bankruptcy . . . . On June 20, 2001, the bankruptcy court approved a transfer of Petitioner Care Matrix/Forest Glen to Rosen Management, Inc. (Rosen Management).

Rosen Management had the option of continuing to operate Petitioner pursuant to the Care Matrix/Forest Glen provider agreement. However, it chose instead to apply to CMS for a new provider agreement.

Between October 2001 and January 28 2002, there was considerable confusion as to whether Petitioner's transfer from Care Matrix/Forest Glen to Rosen Management had been completed. . . .

On or about October 11, 2001, a survey was made of Petitioner in order to determine whether it was complying with Medicare participation requirements. The survey addressed Petitioner's compliance with requirements that are stated at 42 C.F.R. Part 483. However, no survey was performed on that date to determine Petitioner's compliance with the requirements of the Life Safety Code. A Life Safety Code survey was not completed until January 28, 2002. CMS certified Petitioner to participate in Medicare effective January 28, 2002.

ALJ Decision at 2. ⁽⁴⁾

The ALJ also accepted as true, for purposes of deciding the motion for summary disposition, additional assertions of fact by Forest Glen. The ALJ described these assertions as follows:

First, according to Petitioner, the State of Maryland has supported its request that it be certified before January 28, 2002. Second, Petitioner asserts that the delay in conducting a Life Safety Code survey was not its fault. Arguably, the survey was delayed as a result of CMS' misunderstanding as to when the transfer of Petitioner from Care Matrix/Forest Glen to Rosen Management took place.

ALJ Decision at 6.

Before the ALJ, Forest Glen argued that the effective date of its provider agreement should be October 14, 2001. Before us, Forest Glen asserted that the provider agreement should be effective on November 2, 2001, which it identified as the date it was in substantial compliance with all requirements, after correcting deficiencies found in the October 2001 survey. Forest Glen also argued on appeal that the ALJ had erred in concluding that there was a absolute requirement for an LSC survey. Alternatively, Forest Glen argued that CMS had the authority to waive the requirement and that it was arbitrary, capricious, and an abuse of discretion not to do so in light of the CMS failure to recognize and correct the error of its agent, the Maryland State Survey Agency, in not performing the LSC survey in October 2001.

Forest Glen also sought to submit new exhibits, not previously submitted to the ALJ, and an affidavit from the owner of Rosen Management, stating among other things that he did not know that the LSC survey was not done in October 2001.

CMS responded, arguing among other things that it could not move forward with the process to certify Forest Glen as a new provider until it had received official notice from Care Matrix of the transfer of ownership and of termination of the Care Matrix provider agreement, that Care Matrix counsel had instead informed CMS in November 2001 that the transfer did not take place in October, and that CMS had acted promptly when it got official notice of the transfer on January 14, 2002. CMS also took the position that we should reject arguments and evidence not submitted to the ALJ.

CMS did not oppose a request by Forest Glen for oral argument before the Board. That request was granted, and oral argument was held by telephone on February 14, 2003. After the reporting company notified the Board that it was unable to produce a transcript of that argument, the Board granted Forest Glen's request for an in-person oral argument, which CMS did not oppose. The second oral argument was held before the full Panel on May 14, 2003, and the transcript is included in the record.

Our standard of review of an ALJ decision on a disputed issue of law is whether the ALJ decision is erroneous. Our standard of review on a disputed issue of fact is whether the ALJ decision as to that fact is supported by substantial evidence on the record as a whole. Guidelines - Appellate Review of Decisions of Administrative Law Judges Affecting a Provider's Participation in the Medicare and Medicaid Programs (www.hhs.gov/dab/guidelines/) (Guidelines).

Whether a new Life Safety Code survey was required

On appeal, Forest Glen stated that the "ALJ Decision appears to take the position that no determination regarding substantial compliance can be made prior to all necessary certification surveys being conducted" but "the relevant Medicare requirements do not expressly require that surveys must be performed before a certification determination may be made." Forest Glen Br. at 11. Forest Glen also asserted on appeal that neither CMS's initial determination, nor its reconsideration, identified or explained the legal authority for the CMS position that a finding of substantial compliance cannot ever be made until after an LSC survey has been conducted. Transcript of May 14, 2003 Oral Argument (Tr.) at 8.

The ALJ Decision states that the "term 'Federal requirements' is specifically defined to include compliance with the Life Safety Code, if applicable to a provider." ALJ Decision at 4, citing 42 C.F.R. § 489.13(b). The ALJ Decision further states that "Life Safety Code requirements are applicable to skilled nursing facilities such as Petitioner." Id., citing section 1819(d)(2)(B)(i) of the Act. Based on this analysis, the ALJ viewed section 489.13(b) as providing "unequivocally that a facility must be surveyed for Life Safety Code compliance as a prerequisite for certification." ALJ Decision at 5.

While we agree with and adopt the ALJ's more general conclusion that the earliest possible date under the regulations that Forest Glen's provider agreement could be effective was the date the LSC survey was completed, we do not adopt his stated rationale, for the following reasons.

Contrary to what the ALJ Decision states, section 489.13(b) does not contain any language which "specifically defines" the term "Federal requirements." Rather, that section simply refers to the provider agreement being effective on "the date the survey (including the Life Safety Code survey, if applicable) is completed" (assuming the provider meets all applicable Federal requirements on that date). The phrase "if applicable" requires an examination of other relevant statutory and regulatory provisions beyond section 489.13. Moreover, other statutory and regulatory provisions must be consulted to determine what "Federal requirements" apply to a particular prospective provider.

Second, the ALJ Decision states that LSC requirements are applicable to all SNFs. Section 1819(d)(2)(B)(ii) of the Act and the implementing regulations provide, however, that the LSC provisions for nursing homes do not apply in any state if CMS has found that "in such State there is in effect a fire and safety code, imposed by State law, which adequately protects residents of and personnel in skilled nursing facilities." Forest Glen did not contend, however, that the Secretary had made such a finding with respect to the State of Maryland, where Forest Glen is located. Thus, the ALJ's failure to mention these statutory and regulatory provisions is clearly harmless error in the context of this case.

Finally, the ALJ concluded that statute applies LSC requirements for nursing homes to SNFs but did not directly address Forest Glen's argument that the regulations nonetheless permit an earlier effective date based on a finding that an LSC survey is not applicable to Forest Glen. The ALJ Decision does not address this distinction, relied on by Forest Glen. Specifically, Forest Glen asserted that CMS had the discretion to either waive an LSC survey or to certify the facility based on an LSC survey performed while the facility was under different ownership, with the result that an LSC survey would not be "applicable," nor would completion of the LSC survey be required before the provider agreement could be effective.

We reject Forest Glen's arguments based on the statutory and regulatory requirements, as a whole. We conclude that Forest Glen's interpretation of the phrase "LSC survey, if applicable" in the parenthetical in section 489.13(b) is unreasonable, for the following reasons. First, as discussed below, Forest Glen's argument is premised on an erroneous view of the CMS waiver authority. Second, when the parenthetical is read in context, it clearly has the effect that, unless CMS has found that residents are adequately protected by other fire and safety laws within the state in which an SNF is located, a survey for compliance with LSC provisions must be completed on or before the date an SNF provider agreement may become effective.

Section 489.13 refers to meeting "all applicable Federal requirements as set forth in this chapter." Thus, the qualifier "if applicable" in the parenthetical phrase "including the Life Safety Code survey, if applicable" is properly read as referring to the legal issue of whether LSC provisions apply as part of the Federal requirements, set forth elsewhere, that a prospective provider must meet. The regulatory context and history discussed as part of the legal background above support this reading. These effective date provisions were intended to govern agreements with providers for which the survey and certification process is the means for determining compliance with participation requirements. The statute and regulations as a whole clearly contemplate that a survey is the means of determining compliance with LSC provisions, as well as other participation requirements for long term care facilities, including SNFs. It follows therefore that a survey to determine compliance with the LSC provisions must be completed as part of determining whether a facility meets all applicable Federal requirements. Prior to completion of a survey, there is simply not the same degree of assurance regarding compliance with the requirements intended to protect Medicare beneficiaries. ⁽⁵⁾

We also reject Forest Glen's argument that CMS had the discretion to adopt an LSC survey conducted on May 18, 2000 (while the facility was still owned by Care Matrix), rather than requiring a new LSC survey. Forest Glen argued that the SOM issued by CMS permits an LSC survey to be conducted only every three years. Forest Glen asserted that an LSC survey had been conducted in May 2000 and that CMS could have used that survey as a basis for certification. Forest Glen did not cite any specific SOM provision in support of this argument, but apparently was relying on section 2472 of the SOM. That section, however, applies to providers that have already been certified and have a provider agreement. As CMS pointed out and Forest Glen conceded, Forest Glen elected to be treated as a new prospective provider, rather than to continue under the old provider agreement and number, with a change in ownership that would result in the new owner inheriting the facility's compliance history. Moreover, while SOM section 2472 requires a comprehensive LSC survey only every third year, in the other years state survey agencies are to conduct abbreviated LSC surveys (rather than no survey at all, as Forest Glen's argument implied). Finally, the SOM as a whole supports our conclusion that, to certify a prospective SNF in a state where the nursing home LSC provisions apply, an LSC survey is required. For example, SOM section 7200 directs state survey agencies to complete an LSC survey in order to certify an SNF, and SOM section 7203 directs state survey agencies to "verify substantial compliance with all requirements" as part of an initial certification.

Accordingly, we conclude that a new LSC survey was required as a prerequisite to certifying Forest Glen as a new provider.

Whether CMS may waive the requirement for an LSC survey

Forest Glen also argued on appeal that the ALJ erred in not concluding that CMS had abused its discretion and acted in an arbitrary and capricious manner by refusing to waive any requirement for an LSC survey.

The language in the Act and regulations regarding waiver (set out above) refers to waiver of "specific provisions of such Code which if rigidly applied would result in unreasonable hardship upon a facility, but only if such waiver would not adversely affect the health and safety of residents or personnel." CMS pointed to the term "specific provisions," arguing that the waiver contemplated is not waiver of the requirement that facilities must be surveyed for LSC compliance. Forest Glen relied on the fact that the waiver language refers to "provisions" in the plural for its argument that CMS could retroactively waive all of the LSC provisions. Forest Glen asserted that applying the LSC to Forest Glen causes it hardship (the loss of payment for services provided to Medicare beneficiaries) and that the waiver would not adversely affect the health and safety of residents because the January 28 LSC survey found only one deficiency, which was immediately corrected, and because the prior LSC survey (performed before the change of ownership) showed no deficiencies.

We agree with CMS that the waiver contemplated by the statute and regulations is not waiver of the requirement for an LSC survey, nor is it waiver of all of the LSC provisions that otherwise would apply. While CMS clearly has authority to waive more than one provision of the LSC, the statutory and regulatory test for whether a waiver will be granted is not related to the effect on the facility of requiring an LSC survey in the first instance. Rather, the waiver test calls for prospectively determining whether rigidly applying an LSC provision "would result in unreasonable hardship" on the facility and whether waiving the provision would "would adversely affect" residents and personnel of the facility. Moreover, the regulation at section 483.70(a)(2) permits waiver only after receipt of state survey agency findings. Forest Glen is correct that this does not specifically refer to findings as a result of a survey. A survey is the usual means through which state survey agencies make such findings, however. Requiring such findings as a prerequisite to a waiver means that the evaluation of whether the waiver test is met will be done in the context of findings about the extent to which the facility is out of compliance with any LSC provisions for which a waiver is sought.

Even if the Board concluded that CMS had the authority to waive all of the nursing home provisions of the LSC in the absence of a survey, however, this conclusion would not help Forest Glen here. Forest Glen conceded that it did not meet all of the federal requirements for long term care facilities on the date the State survey agency completed its October 2001 survey. Under the effective date provision that applies to SNFs in this circumstance, section 489.13(c)(1), the earliest effective date of a provider agreement would be the date on which "the SNF is in substantial compliance . . . with the requirements for participation" and CMS or the State survey agency "received from the SNF, if applicable, an approvable waiver request." Forest Glen did not claim to have submitted a waiver request prior to January 28, 2002, the date CMS determined the provider agreement was effective.

When this was pointed out, Forest Glen argued that, since the provision at section 489.13(c)(1)(ii) refers to a "waiver request, if applicable" that provision "should be read as requiring a prospective Medicare participating SNF to submit a waiver request only if a waiver is applicable" and that a waiver request was not applicable to Forest Glen because it "had no knowledge until late January 2002 that it should have requested a waiver." Forest Glen Reply Br. at 3. This argument is circular at best and, again, ignores the context in which the language appears. Only the granting of a waiver request can render an LSC provision that applies to SNFs in a particular state inapplicable to a particular SNF. Section 489.13(c)(1)(ii) was clearly intended to govern effective date in the circumstances where the survey has been completed and resulted in findings of noncompliance and where the basis for certification (with respect to any waived requirement) is that CMS has approved a waiver request. The only reasonable reading of the phrase "if applicable" in section 489.13(c)(1)(ii) is to mean "if a waiver is needed in order to determine that the facility is in substantial compliance." Indeed, the preamble to the 1997 revisions stated: "If a facility needs a waiver, current practice remains unchanged, and the effective date is delayed until we receive an approvable waiver request." 62 Fed. Reg. at 43,932.

As a general rule, requiring submission of a written waiver request helps ensure that the statutory and regulatory test for a waiver is met before a waiver is granted. Delaying the effective date of the provider agreement until the date an approvable waiver request is received ensures that a facility needing a waiver has an incentive to submit a request promptly and to include information necessary for the request to be approved. On the other hand, reading the phrase "waiver request, if applicable" to permit effective dates of provider agreements based on waivers to vary based on factors such as whether a facility in fact "knew" that it needed to submit a request would undercut the purpose of the revisions to the effective date provisions. ⁽⁶⁾ As discussed above, the purpose of the revisions was to ensure uniformity in determining effective dates for providers subject to survey and certification.

In sum, the waiver contemplated by the statute and regulations is not waiver of the requirement for an LSC survey to be completed before the provider agreement may be effective. Moreover, even if CMS had the authority to waive all of the provisions of the LSC, waiver would be premature prior to conduct of the LSC survey and submission of a waiver request. Under 489.13(c)(1), even if CMS granted a waiver, this would not permit an effective date of Forest Glen's provider agreement earlier than the one determined by CMS (January 28, 2001) since Forest Glen did not submit a waiver request prior to that date.

What is the scope of the ALJ's (and the Board's) authority

Forest Glen argued that the ALJ should have determined that the CMS failure to grant Forest Glen's waiver request was arbitrary, capricious, and an abuse of discretion. In support of this argument, Forest Glen asserted that the State survey agency (which failed to conduct the LSC survey in October 2001) was CMS's agent, that CMS itself failed to examine the documents from the October 2001 survey when it first obtained them (delaying discovery of the fact that the LSC survey had not been conducted), and that it was unfair of CMS to ultimately accept October 1, 2001 as the date of transfer of ownership while not making the new provider agreement effective until January 28, 2002. CMS acknowledged that it was because of the State survey agency's failure that the LSC survey was not done sooner. Tr. at 16. CMS took the position, however, that Care Matrix was at fault in not providing documentation to show the transfer of ownership until mid-January and that CMS could not legally process the papers related to Forest Glen's application to participate as a new provider absent proof of the transfer of ownership and termination of the old provider agreement. CMS objected to any implication that it had acted improperly or benefitted by accepting the October 1 date as the transfer date once it had documentation that the transfer occurred on that date. ⁽⁷⁾ CMS pointed out that it had given Forest Glen the benefit of the doubt in several respects, including by accepting the survey completed in October 2001 as part of an initial survey of Forest Glen, even though the survey started in September, prior to the transfer. Forest Glen replied that it appeared inconsistent that CMS could exercise discretion regarding how this survey was treated but nonetheless claimed it did not have any other discretion under the regulations.

The ALJ treated Forest Glen's assertions as an equitable estoppel argument, beyond the scope of his authority. He assumed for purposes of summary disposition that Forest Glen was not at fault, but made no assumptions regarding whether CMS was at fault.

Because he viewed section 489.13 as unequivocal and Forest Glen's assertions as an "equitable estoppel" argument, the ALJ may have given short shrift in his analysis to some legal issues that were within the scope of his authority. Clearly, it is within an ALJ's (and the Board's) authority to hear an appeal from an effective date determination, including arguments about how to interpret the effective date provisions, how to apply them to particular facts, and what degree of discretion CMS has to waive requirements. An ALJ may also address factual issues about whether and when CMS received an approvable waiver request. Here, however, Forest Glen's factual assertions (which it put forward as a basis for a finding that CMS abused its discretion) are based on erroneous legal premises about the meaning of the regulations and the degree of discretion that CMS has under the regulations. Only after having rejected Forest Glen's legal premises can we conclude that its factual assertions (even if true) would not provide a basis for granting the relief Forest Glen seeks.

We note that, by framing its argument as a waiver request, Forest Glen is arguably trying to circumvent the limit on ALJ authority in section 498.3(d)(15). While strictly speaking, Forest Glen is not trying to establish an independent right to appeal a determination by the State survey agency about when to conduct an initial survey, the key assertion on which Forest Glen relied for its waiver argument is the State survey agency's delay in performing the LSC survey. When section 498.3(d)(15) was enacted, the preamble to the proposed provision (which was not changed in the final rule) explained that-

Prospective providers . . . would not be entitled to an appeal based on the contention that the survey should have been conducted earlier than it was. . . . For unaccredited providers/suppliers, allegations that the effective date of participation should be earlier than the date the onsite survey by the State survey agency is completed (including the Life Safety Code survey), or earlier than the date on which a plan of correction or waiver request acceptable to [CMS] or the State is submitted, would continue to be governed by § 489.13 and would not form a proper basis for appeal under § 498.3.

57 Fed. Reg. 46,362, 46,363. This approach is consistent with other statutory and regulatory provisions which we have held place the health and safety of the residents above any alleged facility right to have survey procedures or protocols followed. See, e.g., Golden State Manor, supra, at 18-19.

Thus, we conclude that neither the State survey agency's delay in conducting a Life Safety Code survey nor Forest Glen's other factual assertions provide a basis on which to grant an earlier effective date for Forest Glen's provider agreement.

Whether we should admit into the record exhibits submitted for the first time with Forest Glen's appeal to the Board

The ALJ Decision granted summary disposition to CMS, based on 1) material facts that the ALJ determined were undisputed; and 2) additional facts alleged by Forest Glen, which the ALJ accepted as true for purposes of his decision. ALJ Decision at 3. On appeal to the Board, Forest Glen did not specifically assert that the ALJ erred in determining what facts were undisputed, nor challenge his statement of the additional facts alleged by Forest Glen. Instead, Forest Glen asked on appeal that the Board admit into the record an affidavit and exhibits in support of Forest Glen's factual assertions on appeal. CMS opposed this request, arguing that, since Forest Glen did not submit the evidence and arguments to the ALJ, they should not be considered on appeal and that some of the proffered evidence was not reliable.

Forest Glen pointed out that section 498.86(a) of the procedural regulations permits the Board to admit evidence that is "relevant and material to an issue before it." Forest Glen acknowledged that the Board has determined that it will admit new evidence only if the appellant showed good cause why it was not submitted to the ALJ. See Guidelines. Forest Glen argued that it had good cause for not having submitted the evidence sooner, namely that counsel representing Forest Glen before the ALJ was not experienced in Medicare. Forest Glen argued that its proffered evidence showed that it "was eligible to participate in Medicare on November 2, 2001" because on that date it was in substantial compliance with all Medicare requirements, including the LSC. Based on its argument and evidence, Forest Glen asked that the Board reverse the ALJ Decision and either find that the effective date of the provider agreement was November 2, 2001 or remand the case to CMS to reconsider the waiver request.

We decline to admit this evidence into the record for our decision (although we will retain these documents in the file as a proffer of evidence). Our reasons are as follows:

• Prior counsel's alleged lack of Medicare experience does not constitute good cause for failure to submit the exhibits and affidavit to the ALJ. The ALJ's orders contain clear directions for when proposed exhibits and direct testimony were due. The proffered evidence relates in large part to assertions made by prior counsel, which he should have known should be supported by evidence submitted in accordance with the ALJ's orders, regardless of any lack of Medicare experience. Moreover, Forest Glen chose to rely on its counsel and did not allege any reason why it could not have hired more experienced counsel to represent it before the ALJ at an earlier stage of the proceedings.



• The proffered evidence is not material to our decisionmaking since we have already rejected the legal premises on which Forest Glen relied. Moreover, for purposes of summary disposition, the ALJ accepted as true the factual assertions that were timely made by Forest Glen. Forest Glen did not timely raise any exception to the ALJ's conclusion that summary disposition was appropriate.



• Very little of what Forest Glen sought to prove through these exhibits is disputed by CMS. (Nor, we note, does Forest Glen dispute the key assertion on which CMS relied in explaining why CMS did not discover the lack of an LSC survey before January 14, 2002, namely that Care Matrix counsel had previously informed CMS that the transfer did not take place on October 1, 2001).
  

Thus, we decline to admit this evidence into the record.

Whether Forest Glen is entitled to a hearing on the issue of whether it was in substantial compliance prior to January 28, 2002

Forest Glen also argued alternatively that we should remand this case to the ALJ so that Forest Glen could submit evidence that it was in substantial compliance on November 2, 2001. Forest Glen asserted during oral argument that the absence of an LSC survey should not preclude it from showing that it was in substantial compliance, arguing that this was the standard for SNFs and that the ALJ had erred by applying the effective date provision at section 489.13(b), rather than the provision at 489.13(c)(1) that specifically applies to agreement with SNFs. Forest Glen pointed to the definition of "substantial compliance" at section 488.301 to mean "a level of compliance with the requirements of participation such that any identified deficiencies pose no greater risk to resident health or safety than the potential for causing minimal harm." Forest Glen argued that, on November 2, 2001 it had corrected the deficiencies identified in the October 1, 2001 survey and that there were no "identified deficiencies" in meeting the LSC provisions, and that we should find it was in substantial compliance on that basis. Alternatively, Forest Glen argued that it should be able to show at a hearing that it was in substantial compliance with all requirements, including the LSC requirements. ⁽⁸⁾

We note first that Forest Glen did not timely submit evidence that would be sufficient to show substantial compliance with all requirements, including LSC provisions, as of November 2, 2001, either at the ALJ level or before us. The documentary evidence Forest Glen submitted went to its argument about why the LSC survey should be waived, except for its plan of correction for the deficiencies found in the survey completed in October 2001. Forest Glen made a proffer to the ALJ of evidence to show compliance as of October 1, 2001, but the proffer was very vague, and the proffer of testimonial evidence was not supported by any affidavits although the ALJ's first prehearing order informed Forest Glen that he would follow Rule 56 of the Federal Rules of Civil Procedure for purposes of determining whether to grant summary disposition. See Forest Glen's submissions of July 26, 2002; Prehearing Order of May 28, 2002. Forest Glen ultimately conceded that it did not correct the deficiencies found in the October survey before November 2, 2001. See, e.g., Tr. at 10.

In any event, Forest Glen's arguments are again based on faulty legal premises.

Section 489.13(b) applies to determine the effective date when all requirements are met on the date the survey (including an LSC survey, if applicable) is completed. Section 489.13(c) applies if, on the date the survey is completed, a provider fails to meet any of the applicable requirements. Nothing in section 489.13 or elsewhere in the regulations suggests that section 489.13(b) would not apply to an SNF if it met all of the requirements on the date the survey was completed. The reference to "substantial compliance" in subsection (c)(1) recognizes that an SNF may participate in the program even if it has a "deficiency" (fails to meet a requirement), so long as the substantial compliance standard is met. See § 488.301. The reference appears, however, in the context of completion of a survey that resulted in a finding that not all of the requirements were met.

The LSC survey of Forest Glen that was completed on January 28, 2002 found only one deficiency, which Forest Glen corrected that day. It is irrelevant whether the basis for the determination that Forest Glen's provider agreement was effective on January 28 was that CMS determined that Forest Glen met all of the requirements on that date (and that section 489.13(b) applied) or that CMS determined that Forest Glen was in "substantial compliance" on that date (and 489.13(c)(1) applied). Nor would it matter whether we or the ALJ concluded that Forest Glen was in substantial compliance at an earlier date. Under either regulatory section, the effective date could be no sooner than January 28, 2002 because the survey was not completed until that date.

Finally, we note that permitting a determination of "substantial compliance" outside the context of completion of on-site surveys to identify any deficiencies would jeopardize beneficiary health and safety, undercut the survey and certification process, and place an untenable burden on CMS and the appeals process.

Thus, we decline to remand this case to the ALJ.

Conclusion

For the reasons stated above, we uphold the determination that the earliest effective date for Forest Glen's provider agreement under the applicable regulations is January 28, 2002. Since the rationale for our conclusion is different from the ALJ's, we do not adopt his FFCLs 2 through 4 in their entirety, but modify them to read as follows:

FFCL 2. Under the applicable regulations, CMS could not make the effective date of Forest Glen's provider agreement earlier than January 28, 2002, the date when the State survey agency completed the survey of Forest Glen, including a survey to determine whether Forest Glen met provisions of the Life Safety Code that apply to nursing homes in Maryland.

FFCL 3. The authority that CMS has to waive specific provisions of the Life Safety Code is not authority to waive the requirement that a survey be completed before or on the effective date of a provider agreement. Even if CMS could waive all of the provisions of the Life Safety Code, the effective date of the provider agreement, as determined by 42 C.F.R. § 489.13(c)(1), could be no sooner than the date Forest Glen submitted an approvable waiver request (which Forest Glen did not do prior to January 28, 2002).

FFCL 4. The State survey agency's delay in conducting the LSC survey is not a proper basis for appeal under 42 C.F.R. Part 498, nor do the regulations (read as a whole) permit an ALJ (or the Board) to set an earlier effective date for Forest Glen's provider agreement based solely on equitable considerations or on a finding that Forest Glen was in substantial compliance with all requirements on an earlier date.

Donald F. Garrett

Marc R. Hillson

Judith A. Ballard
Presiding Board Member

1. For some types of entities, CMS may "deem" that they meet federal requirements if they are properly accredited.

2. The ALJ Decision states that the survey completed in October 2001 addressed the requirements of 42 C.F.R. Part 483. ALJ Decision at 4. Yet, Forest Glen conceded that that survey did not address LSC requirements. Forest Glen Br. at 4.

3. The Social Security Administration Appeals Council (which reviewed ALJ decisions under Part 498 prior to transfer of the function to the Board) had held, however, that an effective date determination was reviewable as a determination that a prospective provider did not qualify as a provider prior to a particular date. See 57 Fed. Reg. 46,363, citing Citizens General Hospital Home Health Agency, No. HIP 000-61-0031 (1987).

4. The ALJ noted that Rosen Management contended that the closing of the transfer occurred on October 1, 2001, and that CMS did not now contend that this was incorrect, but asserted that "the first notice that it had from Petitioner which included a representation from Care Matrix/Forest Glen that the closing had occurred on October 1, 2001, was in a fax which CMS received on January 14, 2002." ALJ Decision at 2.

5. While subsection 489.13(d)(2) permits a retroactive effective date of a provider agreement for some entities that are already accredited when they apply to participate, it does so only if there are no federal requirements that apply in addition to those included in the approved accreditation program and, even then, the agreement may be retroactive only to the date on which participation was requested.

6. We note that Forest Glen here, as elsewhere, relied on its lack of actual knowledge (more specifically, the knowledge of its owner, Sanford Rosen) that the LSC survey was not conducted. Forest Glen did not specifically allege lack of notice of the requirement for an LSC survey, nor did it explain why it could not have discovered the lack of an LSC survey through the same means that CMS ultimately did--examination of the documents from the October 2001 survey.

7. We note that CMS submitted to the ALJ a January 2002 letter from Forest Glen to CMS describing Care Matrix's actions as a voluntary termination of provider agreement pursuant to 42 C.F.R. 489.52, effective October 1, 2001. CMS Ex. 6.

8. Forest Glen also asserted that we should infer that Forest Glen was in substantial compliance with LSC requirements on November 2, 2001 based on the results of the May 2000 survey and the January 2002 survey. Aside from the fact that the May 2000 survey was not timely submitted, such an inference would not be reasonable. First, it is undisputed that numerous deficiencies were identified in the survey of other requirements completed in October 2001. Second, as CMS pointed out, the results of a county inspection performed in September 2001 (submitted by Forest Glen to CMS, with a note stating that it addressed some of the same safety concerns as an LSC survey) indicate that there were violations of county health and safety requirements at Forest Glen in this interim period. CMS Ex. 9. Third, while Forest Glen described as technical the deficiency found by the LSC surveyors on January 28 and corrected that during the survey, no finding was made (or testimony offered) that that deficiency posed no greater risk than the potential for minimal harm. Finally, the undisputed fact that Care Matrix was going through bankruptcy proceedings prior to the transfer raises concerns about continued compliance.