SUBJECT: Crescent Healthcare,

Petitioner,

Centers for Medicare & Medicaid Services

FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION

By letter dated November 15, 2002, Crescent Healthcare (Crescent) appealed the September 16, 2002 order of Administrative Law Judge (ALJ) Ann Blair (ALJ Dismissal) dismissing as moot its consolidated appeals of the determination of Centers for Medicare and Medicaid Services (CMS) to terminate Crescent's Sacramento home health agency (Crescent - Sacramento), docketed below as C-01-850 and C-01-938. Crescent concurrently requested that the ALJ reconsider and vacate the dismissal order. The Board stayed the appeal with the consent of the parties to await the ALJ's decision on Crescent's request. On April 2, 2003, the ALJ issued a ruling declining to vacate the dismissal (ALJ Ruling). Briefing was then completed on this appeal. We conclude that the ALJ correctly considered Crescent's appeal without merit, but that the basis for her analysis was incorrect. For the reasons explained below, our interpretation of the law governing the federal health care programs and the regulatory scheme governing the participation of providers, we conclude that CMS had authority to terminate Crescent - Sacramento and that Crescent raised no other issue on which it was entitled to a hearing. Since the issues are purely legal and are fully developed on the record before us, we vacate the ALJ Dismissal and proceed to issue final judgment by summary disposition against Crescent.

Relevant Legal Authority

The Act allows certain health care providers to participate in the Medicare program if they have in effect provider agreements with the Secretary. See generally Section 1866 of the Act. Section 1866(e) of the Act defines an eligible "provider of services" as, inter alia, a "home health agency."

The Act empowers the Secretary to refuse to enter into an agreement or to refuse to renew or terminate such an agreement upon notice "after the Secretary -

(A) has determined that the provider fails to comply substantially with the provisions of the agreement, with the provisions of this subchapter and regulations thereunder, or with a corrective action required under section 1395ww(f)(2)(B) of this title,

(B) has determined that the provider fails substantially to meet the applicable provisions of section 1395x of this title,

(C) has excluded the provider from participation in a program under this subchapter pursuant to section 1320a-7 or section 1320a-7a of this title, or

(D) has ascertained that the provider has been convicted of a felony under Federal or State law for an offense which the Secretary determines is detrimental to the best interests of the program or program beneficiaries.

Section 1866(b)(2) of the Act (referencing corresponding sections of the Act as codified in 42 U.S. Code). The regulations specify, inter alia, that CMS may terminate a provider agreement when the provider is not complying with Title XVIII of the Act, with applicable regulations, or with terms of the provider agreement itself, or no longer meets the relevant conditions for participation. 42 C.F.R. § 489.53(a)(1) and (3).

Once a provider has been terminated, the Act prohibits that provider from filing another provider agreement "unless the Secretary finds that the reason for the termination or nonrenewal has been removed and that there is reasonable assurance that it will not recur." Section 1866(c)(1). This statutory requirement is implemented by regulations barring acceptance of a new agreement after an involuntary termination unless CMS finds -

(a) That the reason for termination of the previous agreement has been removed and there is reasonable assurance that it will not recur; and

(b) That the provider has fulfilled, or has made satisfactory arrangements to fulfill, all of the statutory and regulatory responsibilities of its previous agreement.

42 C.F.R. § 489.57.

The Act establishes that "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) of [Section 1866, quoted above] shall be entitled to a hearing thereon by the Secretary (after reasonable notice) . . ." Section 1866(h)(1) of the Act. The regulations define an "affected party" with appeal rights under Medicare as "a provider [or] prospective provider . . . affected by an initial determination . . ." and set out the initial determinations by CMS that are subject to appeal. 42 C.F.R. §§ 498.2 and 498.3. The termination of a provider agreement for reasons set out in 42 C.F.R. § 489.53 is one of the appealable CMS initial determinations. 42 C.F.R. § 498.3(b)(7).

The Act also permits a provider of services to terminate a provider agreement "at such time and upon such notice to the Secretary and the public as may be provided in regulations, except that notice of more than six months shall not be required." Section 1866(b)(1) of the Act. The regulations provide the following requirements for voluntary termination by a provider:

(a) Notice to [CMS]. (1) A provider that wishes to terminate its agreement must send [CMS] written notice of the intent.

(2) The notice may state the intended date of termination which must be the first day of a month.

(b) Termination date. (1) If the notice does not specify a date, or the date is not acceptable to [CMS], [CMS] may set a date that will not be more than 6 months from the date on the provider's notice of intent.

(2) [CMS] may accept a termination date that is less than 6 months after the date on the provider's notice if it determines that to do so would not unduly disrupt services to the community or otherwise interfere with the effective and efficient administration of the Medicare program.

(3) A cessation of business is deemed to be a termination by the provider, effective with the date on which it stopped providing services to the community.

(c) Public notice. (1) The provider must give notice to the public at least 15 days before the effective date of termination.

(2) The notice must be published in one or more local newspapers and must -

(i) Specify the termination date; and

(ii) Explain to what extent services may continue after that date . . .

42 C.F.R. § 489.52 (emphases added).

Factual Background

Crescent - Sacramento had a Medicare provider agreement as a home health agency in Sacramento, California where it held a state license. Crescent Healthcare, Inc. is a corporation which formerly owned and operated Crescent - Sacramento as a branch agency of its larger health care operations. On April 4, 2001, a recertification survey was performed at Crescent - Sacramento which resulted in a statement of deficiencies (SOD) finding that Crescent - Sacramento did not qualify as a home health agency as defined in the Act and regulations and that it was out of compliance with ten conditions of participation. Crescent Motion for Summary Judgment below, Exs. 1 (excerpt of SOD) and 2 (CMS Notice Letter dated June 4, 2001). The recertification survey was triggered by a notice to CMS from the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) that Crescent - Sacramento was "no longer Medicare certified by them due to the finding of two (2) Condition level deficiencies on a survey that was conducted on February 6, 2001." Id., Ex. 2, at 1. The full 61-page SOD is not in the record, since Crescent - Sacramento did not challenge its findings directly, but Crescent did not dispute that it was timely supplied with a copy of the SOD and given an opportunity to demonstrate prompt corrective action. Crescent did submit a plan of correction (POC). ⁽¹⁾ CMS found the POC unacceptable on its face, and hence did not schedule any resurvey visit.

On May 4, 2001, Crescent - Sacramento surrendered its license to the State health department, discharged all its patients and staff, and ceased providing home health services. Id., October 31, 2001 Declaration of Maureen Robles, Crescent Vice President of Nursing. On June 4, 2001, CMS notified Crescent - Sacramento that it did "not accept" the attempt at voluntary termination. Id., Ex. 2, at 2. CMS explained that, where a provider sought to voluntarily terminate by ceasing operations after action has been initiated to terminate the provider involuntarily absent corrective action, the "acceptance of such a maneuver would be to permit an unauthorized circumvention of the mandated consequences of involuntary termination," citing 42 C.F.R. § 489.57. CMS therefore imposed an involuntary termination effective June 24, 2001.

By letter dated June 27, 2001, Crescent appealed this termination notice. Crescent based its appeal solely on the position that the involuntary termination on June 24, 2001, was improper and without effect, because Crescent - Sacramento ceased operations on May 4, 2001, which constituted the effective date of a voluntary termination pursuant to 42 C.F.R. § 489.52. Crescent did not contest any of the underlying findings of noncompliance from the SOD. This appeal was docketed as C-01-850.

On July 27, 2001, CMS sent a second notice to Crescent - Sacramento revised its earlier notice to change the effective date of the involuntary termination from June 24, 2001 to May 4, 2001. CMS concluded that Crescent's provider agreement was effectively terminated by CMS on May 4, 2001 pursuant to 42 C.F.R. § 498.53, noting that Crescent - Sacramento was unlicensed. On August 8, 2001, Crescent filed an appeal of this revised termination notice which was docketed as C-01-938. The appeals were consolidated for decision.

Both parties moved for summary judgment before the ALJ and agreed to a decision on the written record.

ALJ Actions

On September 16, 2002, the ALJ ordered both appeals dismissed. The ALJ reasoned that the "only issue presented by Petitioner's appeal is whether termination of its Medicare participation should be termed 'voluntary' or 'involuntary.' I can see no particular consequences either way." ALJ Dismissal at 4. The ALJ rejected CMS's argument that permitting voluntary termination under these conditions would interfere with "the effective and efficient administration of the Medicare program" by allowing a provider to "evade the more rigorous readmission process generally applicable to involuntarily terminated providers." Id. She considered it inappropriate to "assume in a vacuum that an 'at will' termination would lead to some type of fraudulent application," noting a prior ALJ Decision that the process applied by CMS in evaluating a readmission is not subject to ALJ review. Id. at 4-5, citing Oak Lawn Pavilion, DAB CR426 (1996). The ALJ concluded that there was no "live controversy" presented before her because "nothing [was] at stake in the proceeding" and "the issue is moot." ALJ Dismissal at 4. She analogized the situation to the recent Supreme Court case of City News & Novelty, Inc. v. City of Waukesha, 531 U.S. 278 (2001), noting that the Court there found an owner of an adult-oriented store had no legally cognizable interest in the outcome of an administrative board's denial of its license renewal once it voluntarily withdrew its renewal application and closed its business. ALJ Dismissal at 4.

As noted above, Crescent asked the ALJ to vacate the dismissal. Crescent argued that its appeal was not moot because leaving the involuntary termination in place would be a "black mark" having an adverse impact on various contractual arrangements made by the parent corporation and its other separately-licensed home health agencies and pharmacies (none of which participate in Medicare), as well as insurance coverage and rates, financial opportunities, and general reputation. Petitioner's Request to Vacate at 4-10, and attached November 15, 2002, Declaration of Maureen Robles.

On April 2, 2003, the ALJ declined to vacate the dismissal order and rejected Crescent's claims of injury as speculative. ALJ Ruling at 4.

Arguments of the Parties on Appeal

Crescent argued that CMS's involuntary termination of Crescent - Sacramento was improper, because Crescent - Sacramento had already surrendered its license to operate and had ceased operations, effectively voluntarily terminating its provider agreement on May 4, 2001, prior to the CMS enforcement action. Further, Crescent contended that its appeal of CMS's authority to terminate was not moot, because an involuntary termination would affect various of the parent company's financial and other relationships and the ease with which it could regain a provider agreement in the future. Crescent asked on appeal that the Board grant summary judgment in its favor or, in the alternative, that the case be remanded for oral argument on the mootness question.

CMS argued that Crescent had no standing to appeal, as no actual injury to Crescent itself was proven and the question presented was moot or unripe. CMS further contended, as the ALJ held in refusing to vacate, that if Crescent had wanted to avoid the "black mark" of the termination action against it, it could have "worked with CMS as set forth in the regulation" to effect a voluntary termination at a date accepted by CMS. CMS Opposition at 6, citing ALJ Ruling at 4.

Standard of Review

The standard of review on a disputed issue of law is whether the ALJ decision is erroneous. The standard of review on a disputed factual issue is whether the ALJ decision is supported by substantial evidence in 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 (at http://www.hhs.gov/dab/guidelines/); see also South Valley Health Care Center, DAB No. 1691 (1999), aff'd South Valley Health Care Center v. HCFA, 223 F.3d 1221 (10th Cir. 2000); Lake Cook Terrace Center, DAB No. 1745, at 6 (2000).

1. The key to resolving this appeal is that Crescent did not dispute the survey findings which led to the termination.

The ALJ Dismissal and Ruling, as well the briefing of the parties in appealing them, largely misdirected attention to peripheral questions while failing to focus on what we find to be central to the resolution of the matter. For that reason, it is important to highlight first what this case is not about, before explaining our conclusions about the issues that are in fact necessary to our decision. This is not a case in which we need to resolve whether a provider can appeal adverse findings leading to a remedy despite having ceased operations or voluntarily terminated its provider agreement. Such a case might raise questions of fairness as to whether a facility which, for whatever reason, was not in operation or not seeking to continue participation at the time of the appeal, should nevertheless have a right to "clear its record" of disputed allegations that it failed to comply substantially. While the question would not be not "present" in some sense because it might have consequences only for a later reinstatement, nevertheless the regulatory scheme would not permit any future opportunity to challenge the noncompliance findings if the facility did not timely appeal them once a remedy was imposed. Despite much talk in the briefs about that issue, however, that is not what is at issue here.

Instead this is a case in which a provider sought to strike down a termination remedy as improper without questioning the validity of the underlying findings. The sole grounds for the appeal is that the provider, by using the cessation of business to effect a voluntary withdrawal from the program without providing notice to CMS of its intent to voluntarily terminate its provider agreement, asserted that it had effectively preempted any involuntary termination action against it.

On this issue, we conclude, for the reasons explained further in the following sections of this decision, that Crescent's contention is without merit. Specifically, we find that CMS had sufficient authority to impose an involuntary termination even though Crescent had surrendered its state license and ceased providing services. While we agree with Crescent that CMS could not make the involuntary termination effective on a date earlier than that allowable by the notice provisions, we do not find any significance in clarifying the precise effective dates of either the voluntary or involuntary terminations. We do not find that the latter had to occur before the former in order to have effect. We conclude that the involuntary nature of the termination has legal significance and the dispute about that point is not moot. Finally, we conclude that dismissal was therefore inappropriate and that the proper remedy is summary disposition for CMS on the single legal issue in this case.

2. The ALJ erred in concluding that CMS lacked authority to terminate involuntarily under these circumstances.

The fundamental error in the ALJ's approach to this case is the assumption that a voluntary termination of the provider agreement must perforce imply the impossibility of a subsequent involuntary termination. This assumption might seem reasonable in the context of private contracts, but fails after a full consideration of the statutory and regulatory scheme and its underlying purposes.

The ALJ's reasoning began with her reading of the regulation governing voluntary termination to create two co-equal channels by which a facility may terminate its provider agreement voluntarily -- one by notice to CMS and the other by ceasing business. Thus, the ALJ described her interpretation as follows:

As I said in my Dismissal, clearly, subsection (b) [of 42 C.F.R. § 489.52] gives CMS some control over when a provider may - on its own - terminate a provider agreement. On the other hand, subsection (b)(3), on an equal footing with (b)(1) and (b)(2), also clearly provides that "a cessation of business is deemed to be a termination by the provider, effective with the date on which it stopped providing services to the community."

As I also noted in my Dismissal, it has seemed somewhat contradictory and illogical to me that, based on § 489.42, a provider can terminate its Medicare contract by the rather more difficult method of following the steps set forth in subsections (b)(1) and (2), such as sending written notice, publishing notice, dealing with CMS on the exact date of termination, or can follow the less formal method in subsection (b)(3) by simply ceasing business. I specifically noted that subsection (b)(1) and (2) could be used for circumstances when a provider wished to terminate its Medicare participation agreement, but remain in business. This seems to be the scenario here.

ALJ Ruling at 3. While the regulation may not be a model of clear phrasing, we conclude that, given the context in the regulation itself, the statutory provision being implemented, and the overall purposes of the Medicare program, these provisions cannot reasonably be read as the ALJ interpreted them.

The statute imposes a blanket requirement that voluntary termination must be preceded by notice to CMS and to the public. Section 1866(b)(1) of the Act. The implementing regulations specifically set a process for and require compliance with the notice requirements. 42 C.F.R. § 489.52(a) and (c). Subsection (b) of the regulation merely describes how the effective date of a voluntary termination is to be determined. Subsection (b)(3) would conflict with the statutory requirement if it is read to permit a provider to voluntarily terminate without notice to CMS or the public, so long as it does so indirectly by ceasing operations without telling CMS of its intent. In particular, it would be inconsistent with the obvious purposes of the notice requirements if the effect of such a cessation of business were to insulate the provider from the consequences of its failure to comply substantially with the requirements of its participation in Medicare and leave the beneficiaries and the public unprotected. In accord with the general principle that regulations should be read wherever possible in harmony with their authorizing statute, the better reading is that subsection (b)(3) is intended to provide for the situation where a provider has gone out of business after failing to provide the required notices. Thus, the agreement would not be left open for the provider to claim any reimbursements absent CMS initiating the process of formally terminating the provider's participation in Medicare. We see nothing in the regulations, and certainly nothing in the Act, that would justify reading this subsection as creating a shield for non-compliant providers to use to evade rather than challenge findings of non-compliance that form a basis to terminate them involuntarily from Medicare.

Not only would such an approach conflict with the explicit notice requirements and fly in the face of the implicit purpose of the Act providing for CMS to retain oversight of attempts to voluntarily terminate provider agreements, but it also misunderstands the significance of a provider agreement. The Board has recognized in prior cases that provider agreements are not private contracts in a number of respects. First, the provider agreement is mainly a tool by which the provider expresses its commitment to abide by the various requirements for participation in Medicare. It is not a commitment that CMS will make payments to the provider if the provider at any point fails maintain substantial compliance with the requirements themselves. Second, a provider agreement does not merely embody the obligations of the two signatories toward each other, but rather is a vehicle for benefitting third parties whose interests are made primary under the Act, namely the elderly and infirm beneficiaries who will seek services from the provider. Thus, the Board explained its role as follows:

The provider agreement is not a contract which should be presumed to continue in effect unless HCFA can prove at a hearing that its terms were violated. The provider's obligation to meet the conditions of participation in order to qualify for payment does not arise from the agreement, but from the statute. The primary function of the provider agreement is so that the otherwise qualified provider can provide certain necessary assurances about its participation in the program. 12/ Yet, a provider agreement by itself is not sufficient to show that payment under the statute is authorized. The burden remains on the provider to show that it continues to qualify under the Act and regulations.

* * *

12/ HCFA may require that a provider include in

the agreement an assurance that it will comply with all program requirements, including the conditions of participation, but this does not make the agreement the source of the obligation to meet the conditions. We note that, in the Medicaid program administered by the states, a provider agreement between the state and an entity providing services is evidence of certification, but HCFA may "look behind" the provider agreement and deny Medicaid funding to the state if HCFA finds that the conditions of participation are not met. Thus, in this sense, a provider agreement is analogous to a grant agreement--it has contractual aspects, but cannot be viewed in the same manner as a bilateral contract governing discrete transactions; unlike such a contract, it is governed by statutory provisions expressing the judgment of Congress concerning desirable public policy. See Bennett v. Kentucky, 470 U.S. 668, 669 (1985).

Hillman Rehabilitation Center, DAB Nos. 1611, at 16-17, and n.12 (1997)(1998); aff'd Hillman Rehabilitation Center v. United States, No. 98-3789(GEB) (D.N.J. May 13, 1999); see also Warren N. Barr Pavilion of Illinois Masonic Medical Center, DAB No. 1705 (1999). The effect of allowing the ALJ's interpretation to prevail would be that any provider faced with serious findings of noncompliance and unable to mount any substantive defense to them could preclude CMS from acting on those findings to provide protection to the program in the event reinstatement is later sought. This would turn the role of the provider agreement on its head.

It is important in this regard to understand that reinstatement requirements apply to the provider, not the owner. 42 C.F.R. § 489.57. The term "provider" is defined, inter alia, to include a home health agency that has in effect a provider agreement to participate in Medicare or Medicaid or that seeks to participate in Medicare. 42 C.F.R. § 498.2. There is no provision to treat the agency's owner as a provider independent of the facility with the provider agreement, regardless of how the licensing or ownership arrangements are structured. Only a provider may be an affected party with appeal rights from adverse initial determinations. Id. Even though the facility is not currently in operation, either the present owner or a new owner might choose to seek a new or reinstated provider agreement at some point in the future. The Board has held that the new owner of a facility acquires the relevant compliance history/issues of the facility if it undertakes to assume the facility's provider number, without regard to new owner's record with other facilities. Crestview Parke Care Center, DAB No. 1836 (2002); CarePlex of Silver Spring, DAB No. 1683 (1999); CarePlex of Silver Spring, DAB No. 1627 (1997).

We conclude that, while cessation of business is sufficient to preclude a provider from seeking any further payment from CMS under the provider agreement, it does not preclude CMS from following through on an involuntary termination of the provider's further participation in the Medicare program.

3. The involuntary termination could not be effective prior to the required notice but the effective date of either the voluntary or involuntary termination has no practical significance in this case.

The ALJ found that CMS had no authority to terminate retroactively. We agree that CMS identified no applicable authority under which it could revise an effective date backward to terminate a provider agreement involuntarily prior to the required notice period, based on the date a provider voluntarily terminated (by ceasing business). The ALJ appeared to assume, however, that this reasoning implied that CMS could not impose an involuntary termination at all once a provider ceased operations. We do not agree with that inference.

The regulation cited in this regard by the ALJ, 42 C.F.R. §§ 489.57, was set out above. It empowers CMS, inter alia, to terminate a provider agreement if CMS finds that the provider is not complying with the applicable statutory or regulatory provisions or no longer meets the appropriate conditions of participation. In addition, regulations require CMS to give notice to the provider prior to an involuntary termination taking effect, generally at least 15 days prior to the effective date, with shorter notice in cases of immediate jeopardy to patient health or safety. 42 C.F.R. § 489.52.

Nothing in the regulations cited by the ALJ or Crescent, however, limits CMS's authority to terminate by requiring that CMS's termination action must take effect before the provider ceases operations or takes other action to terminate voluntarily. We see no policy reason to read such a rule into the statutory and regulatory scheme. Further, we find no language in the statute or regulations that would indicate an intention by Congress or CMS to make the termination process a race between CMS and a provider alleged to be out of substantial compliance.

Essentially, the ALJ seemed to rely on the simple notion that CMS could not terminate an agreement that had already ceased to exist. This logic, while superficially appealing, falls short because it treats provider agreements required as a condition of participation in federal health care programs as if they partook simply of the nature of private contracts. As we have already explained, this conception is mistaken. The better reading is that the termination becomes involuntary once the requisite notice period has passed even though the provider may have ceased providing services voluntarily prior to that date.

4. While the specific effective date is not significant, the involuntary nature of the termination has legal effect and so is not necessarily a moot point.

While we have found that CMS could not retroactively alter the effective date of the involuntary termination to a time prior to the requisite notice period, we also conclude that the specific effective dates of either the voluntary or involuntary termination have no legal significance. Since we conclude that CMS could alter the status of the termination from voluntary to involuntary even after the date of Crescent's voluntary termination, there would be no reason for CMS to need to alter the June 24^th date for the involuntary termination. Nor do we need to address whether Crescent's failure to comply with mandatory notice provisions by trying to effectuate a voluntary termination by closing its doors has any impact on the deemed effective date of the voluntary termination. For one thing, once Crescent ceased providing any services, it was ipso facto not providing services to any Medicare beneficiaries for which it might later attempt to seek reimbursement. Therefore, it does not matter legally whether the termination became involuntary on May 4^th or June 24^th.

We do not agree with CMS, however, that the question of whether the termination was involuntary, as opposed to voluntary, is moot. Cf. CMS Br. at 1-2. The ALJ dismissed the appeal as moot on the ground that it made no difference whether the provider agreement was terminated voluntarily or involuntarily where the provider did not show any actual and present injury. In the ALJ Ruling, the ALJ again stated that she "simply could not understand why Petitioner had bothered to appeal CMS's 'involuntary termination,'" and at the same time that she could not see "why CMS was intent on not allowing Petitioner to voluntarily exit as a provider." ALJ Ruling at 2. The potential for future "black marks" was too speculative, she ruled, to make Crescent "an affected party with appeal rights." Id. In addition, the ALJ relied on Hospicio en el Hogar Mayaguez, Inc., DAB CR370 (1995) as applicable here for the proposition that the question of whether CMS has authority to terminate is made moot where a provider voluntarily terminated its participation. Id. The Hospicio case involved a provider who denied that it had ceased operations within the meaning of the regulations and hence denied that its challenge to the adverse survey findings was moot. Hence, it addressed the issue we have declined to reach here. The decision of another ALJ in a different context is not binding on this ALJ and certainly not on the Board.

We do not find these bases for assessing mootness sufficiently persuasive to justify dismissal. Nor do we find it useful to parse the various court cases referenced by the ALJ or the parties relating to such doctrines as "case and controversy" or "ripeness." As the ALJ herself noted, the "Constitutional issues [she] raised were used for purposes of analogy as administrative hearings much be decided on applicable statutes and regulations." ALJ Ruling at 2. We are not inclined, as we mentioned above, to resolve in this case the question of whether fairness under the regulatory scheme here would ever require that a provider who has ceased operations nevertheless have an opportunity to challenge an involuntary termination. The involuntary nature of the termination has legal consequences relating to the hurdles that a provider faces in attempting to return to the Medicare program. The existence of a "live controversy" thus does not derive from the lengthy debates about what effect the involuntary termination might have on the parent company's various financial and health care businesses, ⁽²⁾ but rather from the potential effect on the Medicare program itself. For example, if a provider were certified noncompliant based on a survey and the provider asserted that the allegations of noncompliance were entirely erroneous, the effect of precluding a hearing on those allegations might be to create an unnecessary obstacle to that provider returning to providing services in a community where they were badly needed.

The Supreme Court case mentioned by the ALJ does not resolve that question of mootness here because it is factually dissimilar. The adult-oriented store involved was not permitted to continue a challenge to the denial of its license where the business had closed and the owner made it clear it did not intend to return to operation. By contrast, Crescent made no representations that it had no intention of returning this home health agency to business or of seeking later to recertify the same provider. See Robles Declaration, attached to CMS motion for Summary Judgment below. In fact, the owner of the provider represents that it indeed may seek Medicare certification for some or all of its home health agencies in the future. Id.

For these reasons, we reject the ALJ's finding of mootness.

5. We conclude that dismissal was improper and that summary disposition against Crescent is appropriate.

The regulations permit an ALJ to dismiss a hearing request for cause for limited reasons, i.e., res judicata, untimeliness and in the situation where the "party requesting a hearing is not a proper party or does not otherwise have a right to a hearing." 42 C.F.R. §§ 498.70(b). The first two are not relevant here. The ALJ did not address whether Crescent was a proper party. It appears that Crescent, as the owner/licensee for Crescent - Sacramento, could reasonably be understood to have acted for the provider in filing the hearing request appealing the involuntary termination for failure to substantially comply with applicable requirements. The only remaining basis for the dismissal thus must lie with the idea that Crescent had no right to a hearing because the issue it appealed was moot. We have explained above that we reject the finding of mootness. Therefore, we conclude that the appeal was not properly dismissed. We turn next to the determination of how to appropriately resolve the matter.

Crescent raised a single, purely legal, issue in its notice of appeal. Crescent identified no issue of material fact and contested none of the findings on which the involuntary termination action was based. Specifically, the ALJ found that Crescent "has never suggested it desires to contest whether CMS had a basis to find it not in compliance with federal regulations." ALJ Ruling at 4. In order to resolve the issues before us, we have also necessarily resolved the merits of the only issue raised by Crescent on appeal, i.e., we have concluded that CMS was authorized to terminate Crescent - Sacramento involuntarily even though the provider had ceased operations before the notice of termination was issued.

Given our conclusions, no purpose would be served by remanding the matter to the ALJ. We therefore conclude that the most appropriate way to proceed is to dispose of the appeal at this level. We therefore order final summary disposition against Crescent.

Conclusion

For the reasons explained above, we reverse the ALJ Dismissal and Ruling. We conclude that CMS was authorized to terminate Crescent involuntarily.

Cecilia Sparks Ford

Donald F. Garrett

Marc R. Hillson
Presiding Board Member

1. The excerpt of the SOD and POC in the record is signed and dated by the Home Health Administrator of Crescent - Sacramento on April 22, 2001.

2. It is not entirely clear from Crescent's presentation why the involuntary termination would be critical in this regard in any case. Crescent argued that it was required to furnish information to banks about "the Medicare certification status of its agencies" and that its contracts with third party payors of its other agencies obliged it to disclose "any prior negative Medicare certification history or event . . . ." Crescent Br. at 9 (unnumbered). The survey resulted in a certification of noncompliance which went unchallenged by Crescent. Presumably, Crescent's responsibilities to these various entities were already triggered by that negative certification event, no matter what remedy CMS might ultimately impose as a result.