Department of Health and Human Services DEPARTMENTAL APPEALS BOARD Civil Remedies Division |
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IN THE CASE OF | |
Options Center of St. Petersburg, |
DATE: November 3, 2000 |
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Health Care Financing Administration
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Docket No.C-99-468
Decision No. CR712 |
DECISION | |
This case having been reassigned to me, I enter summary
disposition sustaining the determination of the Health Care Financing
Administration (HCFA) not to certify Petitioner, Options Center of St.
Petersburg, to participate in the Medicare program as a community mental
health center providing partial hospitalization services. I premise this
decision on my conclusions that: (1) Petitioner did not meet the criteria
for certification as a community mental health center providing partial
hospitalization services; (2) HCFA did not impermissibly apply the regulations
retroactively to Petitioner's application for participation in Medicare;
and (3) I do not have the authority to decide Petitioner's additional
affirmative arguments, that HCFA's interpretation of its regulations violated
the Administrative Procedure Act, was arbitrary and capricious and that
HCFA should be estopped from denying Petitioner's certification application. I. Introduction Petitioner applied to be certified to participate in the
Medicare program as a community mental health center which provides partial
hospitalization services. On August 28, 1998, HCFA denied Petitioner's
application and on December 21, 1998, HCFA denied Petitioner's request
for reconsideration. Petitioner timely requested a hearing. On October
20, 1999, HCFA filed its Motion for Summary Disposition and Memorandum
of Law in Support thereof. (HCFA Br.). HCFA submitted seven exhibits (HCFA Exhibits (Exs.) 1-7).
Subsequently, with its Reply to Petitioner's Memorandum of Law in Opposition
to Respondent's Motion for Summary Disposition (HCFA Reply), HCFA filed
two attachments (HCFA Attachments A and B). Petitioner submitted nine
exhibits (P. Exs. 1-9) with its response (P. Br.). In order to maintain
internal consistency, I am marking HCFA Attachments A and B as HCFA Exs.
8 and 9 respectively. Without objection, I admit into evidence HCFA Exs.
1-9 and Petitioner Exs. 1-9. II. Governing law and the basis for HCFA's determination
"Partial hospitalization services" are services which
are defined in section 1861(ff) of the Social Security Act (Act) and reimbursed
by the Medicare program. "Partial hospitalization services" consist of
services that are prescribed by a physician and are provided pursuant
to specified statutory criteria, which include: individual and group therapy
with physicians or psychologists; occupational therapy requiring the skills
of a qualified occupational therapist; services of social workers, trained
psychiatric nurses, and other staff trained to work with psychiatric patients;
drugs and biologicals furnished for therapeutic purposes; individualized
activity therapies; family counseling; patient training and education;
diagnostic services; and such other items and services as the Secretary
of this Department may determine to be reasonable and necessary. Sections
1861(ff)(1); 1861(ff)(2)(A)-(I) of the Act. The Medicare program will reimburse for partial hospitalization
services that are provided by either a certified hospital or by a community
mental health center. See section 1861(ff)(3)(A) of the Act. A
"community mental health center" is defined by the Act to mean an entity:
Section 1861(ff)(3)(B)(i), (ii) of the Act. Although the
Act refers to section 1916 of the Public Health Service Act, section 1916
was recodified as section 1913(c)(1) of the Public
Health Service Act. Under section 1913(c)(1), the services that a community
mental health center must provide include the following:
HCFA has published policy guidelines which describe a
community mental health center's obligations under section 1913(c)(1)
of the Public Health Service Act. In a document that is entitled "All
States Letter 76-95," HCFA stated that a community mental health center
must provide all of the services that are listed in the Public Health
Service Act, either directly or under arrangements with others. HCFA Ex.
2. HCFA has elected to defer to State law in order to determine
what constitutes adequate screening for patients being considered for
admission to State mental health facilities pursuant to section 1913(c)(1)(iv)
of the Public Health Service Act. HCFA Ex. 3. HCFA
defines "screening" to be:
HCFA Ex. 3, at 1.
Florida State law defines the entities that are authorized
to perform the procedures which are necessary prerequisites to the admission
of individuals for treatment at a Florida State mental health facility.
Under the Florida Mental Health Act (Florida State Act), Fla. Stat. Ann.
� 394.451, et seq., only certain types of entities are authorized
to perform the necessary procedures. Specifically, these entities are
limited to entities which are authorized to perform "transfer evaluations."
Fla. Stat. Ann. � 394.461(2). A "transfer evaluation" is defined under
Florida State law as being:
Fla. Stat. Ann. � 394.455(29). The Florida Department of Children and Families has interpreted
the aforesaid statute as providing that only a community mental health
center or clinic is authorized to perform transfer evaluations under Florida
State law. HCFA Ex. 4. Under Florida State law, a "community mental health
center or clinic" is a:
Fla. Stat. Ann. � 394.455(6).
HCFA stated that it was denying Petitioner's application
for certification for participation in Medicare because Petitioner did
not provide screening for patients being considered for admission to state
mental health facilities:
HCFA Ex. 5, at 1. HCFA's denial was based on the following findings and
conclusions -
HCFA Ex. 5, at 3. In its December 21, 1998 reconsideration determination,
HCFA reaffirmed that Petitioner did not provide screening for patients
being considered for admission to State mental health facilities. HCFA
noted that it defined screening as performance of at least one of the
steps in the process by which an individual is clinically evaluated, pursuant
to State law, for the appropriateness of admission to a State mental health
facility by an entity that has both the appropriate clinical personnel
and authorization under State law to perform all of the steps in the clinical
evaluation process except those required to be performed by a 24-hour
facility. HCFA stated that Petitioner had not demonstrated that it satisfied
these requirements. HCFA Ex. 7. III. Issues, findings of fact and conclusions
of law
The issues in this case are whether:
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ANALYSIS | |
I make findings of fact and conclusions of law (Findings)
to support my decision in this case. I set forth each Finding below as
a separately numbered heading, and I discuss each Finding in detail.
A threshold question in this case is whether summary disposition
is appropriate. Summary disposition is appropriate where: either there
are no disputed issues of material fact and the only questions that must
be decided involve application of law to the undisputed facts; or, where
the moving party must prevail as a matter of law even if all disputed
facts are resolved in favor of the party against whom the motion is made.
I have looked closely at the parties' arguments
to decide whether there are disputed issues of material fact. There are
no disputed material facts in this case. Essentially, the parties are
relying on the same facts and are making legal arguments based on those
facts. Therefore, I find that summary disposition is appropriate in this
case.
Petitioner does not satisfy participation criteria for
a community mental health center providing partial hospitalization services.
Consequently, I grant HCFA's motion for summary disposition. In order to be certified to provide partial hospitalization
services - indeed, in order to fall within the statutory definition of
a community mental health center contained at section 1913(c)(1)
of the Public Health Service Act - an entity must:
Act, Section 1861(ff)(3)(B). The record of this case shows that Petitioner did not
qualify under applicable State law as a community mental health center. As I discuss above, at Parts II.A. and B. of this decision,
HCFA has elected to defer to the States for the determination of what
constitutes an appropriate screening for the admission of patients to
State mental health facilities. See HCFA Ex. 3. Florida State law
discusses screening as "transfer evaluations." Fla. Stat. Ann. � 394.455(29).
Under Florida State law, a transfer evaluation for the purpose of determining
whether a patient may be transferred to a State mental health facility
may only be performed by a "publicly-funded, not-for-profit center
which contracts with the department [of Children and Families] for the
provision of inpatient, outpatient, day treatment, or emergency services."
Fla. Stat. Ann. � 394.455(6) (emphasis added). Petitioner plainly concedes that it is a privately funded,
for-profit corporation which did not contract with the Florida Department
of Children and Families for the provision of inpatient, outpatient, day
treatment, or emergency services. P. Br. at 2, 6, and 9; P.
Ex. 2; see also HCFA Ex. 5. Consequently, Petitioner does
not qualify to perform transfer evaluations under Florida State law.
I find that HCFA did not apply the regulations or administrative
rule in an impermissibly retroactive manner. Petitioner argues that HCFA changed the law subsequent
to its application for certification. P. Br. at 14-15. The controversy
centers on HCFA's definition of the screening requirement set forth in
an internal HCFA memorandum which contains instructions for writing letters
rejecting applications for certification. Petitioner argues that this
memo constituted a change in the criteria for certification which was
unfairly applied to their application retroactively. I find that HCFA
has not impermissibly applied the regulations retroactively for two reasons.
First, HCFA's memorandum does not evidence a change in the regulation
or criteria for certification (as explained more fully below, the memo
may indicate that HCFA was policing an existing regulation more rigorously,
however, the criteria was not changed subsequent to Petitioner accruing
a right to participate Medicare). Second, in order to be an impermissible
retroactive application of law, a party must have a right or vested interest
that is disturbed - Petitioner had no such right or interest because its
application was pending at all times relevant to this case. I address
these points in turn below. Additionally, I explain that Petitioner's
argument concerning retroactivity is reducible to an assertion that HCFA's
treatment of Petitioner's application was unfair because it detrimentally
relied on HCFA's past practice. I also explain that I do not have the
authority to decide this additional affirmative argument. My analysis of the retroactivity question turns on the
relevant facts, including the dates in question and the participation
criteria in place on the date of the application, during its pendency,
and at the time of its rejection. These facts must then be measured against
the applicable law regarding retroactivity. The documents and dates we are mainly concerned with are
the date of the application by Petitioner for participation in Medicare,
the internal HCFA Memorandum describing the basis on which to issue denial
letters, and the letter from HCFA denying Petitioner's application for
certification. The undisputed facts are as follows:
The August 21, 1998 Memo says, in pertinent part
HCFA Ex. 3, at 1 (emphasis added). This bolsters the interpretation
that HCFA was applying its understanding of the regulations prospectively.
Petitioner takes issue with the Memo's description of how HCFA views "screening"
in the context of providing screening for admission to State mental health
facilities - a requirement for participation Medicare. The language in
the memo on this issue is as follows:
HCFA Ex. 3, at 1. As explained above in section II. B.,
Florida State law requires, among other criteria, that a facility be not-for-profit.
It is undisputed that Petitioner is a for-profit entity. Before discussing the law concerning retroactivity and
the regulations regarding the date on which an application is deemed certified
and their application to the facts in this case, I briefly review one
other point of contention between the parties. This concerns the categorization
of the HCFA memo as an interpretive rule and what the consequences of
that categorization are to this case according to the parties. HCFA characterizes the content of the Memo as an "interpretive
rule." HCFA Br. at 31. HCFA posits that the memo is clarification written
after the belated discovery of the difficulties created by the interaction
between state commitment laws and the screening requirement. HCFA Reply
at 13. HCFA argues that an interpretive rule is different
from a more substantive change in a regulation or law which might cause
retroactivity concerns. HCFA cites case law to support this view of the
Memo and the law regarding interpretive rules. Petitioner argues that
HCFA's screening definition has a retroactive effect and is therefore
precluded from being categorized as an interpretive rule. P. Br. at 16
- 17. Neither HCFA's nor Petitioner's arguments are relevant
on the issue of impermissible retroactive application in this case. Whether
HCFA's definition is categorized as an interpretive rule or something
else is not the issue. Because I find that HCFA did not apply new law
or new criteria to Petitioner's application, I do not need to decide that
issue here. I now turn to the to the law regarding retroactivity and
then the regulations regarding the date of certification. The test for
retroactive effect sets forth, in relevant parts, that: (1) a party must
generally have a vested right to sustain a claim that one has been wronged
by retroactive implementation of the law; and (2) a law may not generally
impose new duties for transactions already completed. Accordingly, I find
that the Memo and treatment of Petitioner's application were not impermissibly
retroactive because (1) Petitioner had no vested right to participate
in Medicare, and (2) no new duties were imposed with respect to transactions
already completed. It is true that law applied with retroactive effect, especially
without explicit retroactive intent expressed in the text, is generally
disfavored.(1) Accordingly, the test for
determining retroactive effect has developed. Chadmoore Communications,
Inc. v. Federal Communications Commission, 113 F.3d 235 (D.C. Cir.
1997), set forth that test. The test is whether the rule impaired rights
that the applicant possessed when it acted, or increased the applicant's
liability for past conduct, or imposed new duties with respect to transactions
already completed. Id. at 240-41. In Accredited Cosmetology
Schools v. Alexander, 979 F.2d 859 (D.C. Cir. 1992), the court used
similar language in defining retroactivity in an administrative context.
That court said that "a law is retroactive if it impairs vested rights
acquired under existing law or creates a new obligation in respect to
transactions already past." Id. at 864 (quoting Neild v. District
of Columbia, 110 F.2d 246, 254 (D.C. Cir. 1940) (quoting Society
for Propagating the Gospel v. Wheeler, 22 F.Cas. 756, 767 (C.C.D.N.H.
1814) (Story, J.)). Moreover, it has been held that the mere filing of
an application with an agency does not entitle the applicant to the operation
of the substantive regulations then in force at the time of the filing
date. Pine Tree Medical Associates v. Secretary of Health and Human
Services, 127 F.3d 118 (1st Cir. 1997). In
that case it was found significant that HHS
was applying new guidelines prospectively. A review of the facts shows that Petitioner had nether
a vested right to participate in Medicare nor did the Memo impose a new
duty with respect to a transaction already completed. There is no dispute
regarding the relevant dates in this matter and the regulations are clear
concerning when a CMHC receives what might be considered a vested
right in terms of participation in Medicare. In order to be certified
to participate in Medicare, a CMHC must apply to participate in Medicare.
The CMHC must be inspected by or on behalf of HCFA and HCFA must certify
that the CMHC satisfies applicable participation requirements. Prior to
September 17, 1997, the regulation that governed the effective date of
participation of a CMHC was 42 C.F.R. � 489.13(c)(2) (1995). That regulation
provided that, for requests for Medicare participation received after
June 30, 1992:
That regulation was changed effective September 17, 1997.
On that date, the relevant regulation governing the effective date of
participation of a CMHC was codified as 42 C.F.R. � 489.13(a)(2)(i). This
regulation specifies that the effective date of a participation agreement
with a CMHC:
42 C.F.R. � 489.13(a)(2)(i). Applying the regulation to the facts in this case, it
is clear that, under either version of the regulation, there is no effective
date with regard to Petitioner's application. This is because Petitioner
was never in compliance with federal requirements. The regulations contemplate
full compliance before certification. As explained above, on July 25, 1996. Petitioner filed
an attestation that it qualified as a community
health center as described by Section 1913(c)(1) of the Public Health
Service Act and requested Medicare Part B certification for the program
by HCFA. Petitioner points to the fact that during the application process,
information concerning the status of the application was communicated
back and forth between the parties including: "By letter dated November
7, 1997 HCFA notified Dr. Leyva that while Options Center met other criteria
for a community mental health center, its application was being denied
because the facility did not provide specialized outpatient services for
children." P Br. at 7. Petitioner represents that verbal assurances were
made by HCFA that sufficient information had later been submitted to show
that Petitioner met this requirement and that a provider number would
be forthcoming. P. Br. at 7-8. Nonetheless, as Petitioner relates in its
brief:
P. Br. at 8-9. In its letter requesting HCFA reconsider the denial dated
November 4, 1998, Petitioner argued that several factors indicated that
an application of HCFA's interpretation of the regulation to their situation
was "improper and unjust." HCFA Ex. 6, at 2. As discussed above in Part II. C., Petitioner's for-profit status renders it ineligible to participate in Medicare. Significantly, this requirement and Petitioner's status were in place throughout the time period in question: from the time of the application - July 25, 1996; at the time of HCFA's Memo - August 21, 1998; at the time of HCFA's letter denying certification - August 28, 1998; and at the time of HCFA's letter denying Petitioner's request for reconsideration - December 21, 1998. Petitioner has never asserted that it meets the federal requirements because it admittedly is a for-profit entity. Therefore, there has been no showing of compliance at any date. Accordingly, I find, in keeping with the general test
identified in Chadmoore and Accredited Cosmetology, and
on the facts of this case, that Petitioner possessed no right, nor incurred
any new duty as a result of the memo issued by HCFA clarifying the criteria
for participation in Medicare. I also find that
the memo clarifying the definition of screening does not create a new
law or new criteria, nor, despite HCFA's use of the term "interpretive
rule," does it constitute a new definition or interpretation. In this
case HCFA has not interpreted the criteria established in the regulations
differently - it has upgraded its lax enforcement of the existing regulations
to a more robust enforcement. While it may be unfortunate that some entities
accustomed to lax enforcement had expectations which were disappointed,
that is a grievance which cannot be remedied by this tribunal. A close look at the facts regarding Petitioner's retroactive
application argument reveals that the essence of the argument is actually
one about an expectation, detrimental reliance and dilatory processing.
Petitioner makes some of those arguments specifically, and I have addressed
them elsewhere in this decision. The facts girding Petitioner's claim
relating to the retroactive application argument are that:
HCFA Ex. 6, at 2. Petitioner adds that Options operated
in good faith for approximately 2 years and Options incurred over $250,000
in expenses under HCFA's former interpretation. Thus, "[a] retrospective
application of this interpretation is improper and unjust." HCFA Ex. 6,
at 2. Petitioner concludes:
HCFA Ex. 6, at 2 - 3. I note that HCFA is not bound by past practice. The premise
which underlies HCFA's August 21, 1998, memorandum is that, prior to that
date, HCFA had misunderstood the implications of Florida State law and
had been certifying incorrectly as CMHCs entities that did not comply
with the requirements of Florida State law. I am aware of nothing in the
Act or in regulations which commands HCFA to continue to certify applicants
to participate on the ground that it has certified similarly situated
applicants in the past. There is nothing that I am aware of in either
the Act or regulations which forces HCFA to adhere rigidly to an incomplete
understanding of a State law if, in fact, HCFA's understanding of how
the law operates evolves over time. HCFA has the responsibility to apply
the law in a manner that is consistent with its understanding of the meaning
of a State law. HCFA is under no obligation to continue to apply a policy
that it had applied previously if it determines that the requirements
of a State's laws direct it to do otherwise. Detrimental reliance is an argument of the type beyond
my authority to decide and akin to the additional affirmative arguments
put forward by Petitioner as discussed in Part III. B. 4. below.
Petitioner has made additional affirmative arguments.
Petitioner asserts that HCFA's interpretation of the screening requirement
is arbitrary and capricious and is ultra vires the Act because it was
not published through notice and comment rulemaking consistent with the
Administrative Procedure Act. Petitioner also asserts that HCFA should
be estopped from denying Petitioner's certification application because
Petitioner was led to believe that its certification application would
be approved based on: (1) HCFA's past general practice; (2) costs incurred
by Petitioner awaiting final action on its application; and (3) HCFA's
prior approval of certification of another, older, facility owned by Petitioner's
President. I do not have authority to hear and decide these arguments.
My authority in cases involving HCFA is limited to hearing and deciding
those issues which the Secretary of the Department has delegated authority
for me to hear and decide. That authority is specified in 42 C.F.R. ��
498.3 and 498.5. The regulations authorize me only to hear and decide
cases involving specified initial determinations by HCFA. The regulations give me the authority to hear and decide
whether HCFA's determination that an entity fails to qualify as a provider
was made correctly. 42 C.F.R. �� 498.3(b)(1); 498.5(a)(2). In such a case,
I may decide whether HCFA correctly applied regulations and interpretations
of the law to the facts of a case. I may also decide whether HCFA's interpretation
of a regulation is correct or incorrect. However, I lack the authority
to decide whether HCFA or the Secretary published an interpretation of
law in violation of the Administrative Procedure Act, or acted arbitrarily
and capriciously. Nor do I have authority to hear claims of estoppel against
HCFA or the Secretary. It is well-established that, as an administrative
law judge, I lack the authority to hear and decide estoppel arguments
involving alleged dilatory processing of applications for provider or
supplier certification. GranCare Home Health Service & Hospice,
DAB CR464 (1997); The Rivers HealthCare Resources, Inc., DAB CR446
(1996); SRA, Inc. D/B/A St. Mary Parish Dialysis Center, DAB CR341
(1994). I infer from these cases that I also do not have the authority
to hear estoppel arguments. Petitioner has offered no argument here which
would give me reason to revisit the holdings in these decisions. Based on the foregoing, I enter summary disposition sustaining the determination by HCFA not to certify Petitioner to participate in the Medicare program as a community mental health care provider providing partial hospitalization services.
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JUDGE | |
Alfonso J. Montano Administrative Law Judge
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FOOTNOTES | |
1. Retroactive application may be disfavored, in a general sense, in the law. See e.g., Georgetown University Hospital v. Bowen, 821 F2.d 750 (D.C. Cir. 1988) (holding that legislative rules must be prospective in application and agencies are not free to make rules retroactive to cure a "mere procedural defect"). However, other cases indicate that there is no prohibition on retroactive application. See Motion Picture Association of America v. Oman, 969 F2.d 1154 (D.C. Cir. 1992) (Congress must expressly confer retroactive rulemaking power). | |