DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: Oklahoma Department of Human Services
Docket No. 86-40
Decision No. 799
DATE: October 22, 1986
DECISION
The Oklahoma Department of Human Services (DHS, State) appealed a
decision
by the Health Care Financing Administration (HCFA, Agency)
disallowing
$4,446,311 in federal financial participation (FFP) claimed
under Title XIX
of the Social Security Act (Medicaid) for payments made
to the Oklahoma
Teaching Hospitals (OTH). The disallowed payments were
for inpatient
hospital services provided at the Central Oklahoma
Juvenile Treatment Center
(COJTC) during the period July 1, 1982 through
August 31, 1985.
According to the Agency, COJTC was ineligible for FFP
because it was never
properly certified to HCFA as a component of OTH
under the requirements of
Title XVIII (Medicare).
In light of our review of the arguments and materials presented by
the
parties, we have concluded that, based on existing regulations
and
policies, COJTC need not be certified by HCFA as a qualified
Medicare
provider to be eligible to participate in Medicaid, i.e.,
state
certification is sufficient for Medicaid participation. In
addition, we
have determined that, even assuming that the Agency has
authority to
review a State's Medicaid certification, the Agency did not
establish
that COJTC did not provide inpatient hospital services as a
component of
OTH. Accordingly, we reverse this disallowance as being
unsupported by
the record. 1/
1/ The State conceded that a disallowance for the period from
July 1,
1982 until State Medicaid certification was completed might
be
appropriate. Appeal, n.3. The State maintained that
COJTC's
certification was complete with the submission of an acceptable plan
of
correction on December 30, 1982. Reply, p. 17. The record is
unclear,
however, as to when certification was actually completed, since
the
certification form proffered by the State (State's Ex. 51) indicates
on
its face that the Life Safety Code inspection results had not
been
received by (continued on the next page)
- 2 -
Regulatory Background
The Medicaid program under Title XIX of the Social Security Act (Act)
is
administered by the states and partially funded by the
federal
government. A facility must be inspected by the proper state
survey
agency in order to qualify for reimbursement for "inpatient
hospital
services" provided to a patient who is eligible for Medicaid. 2/ In
the
case of hospitals, the state survey agency must be the
agency
responsible for licensing such institutions under state law.
1/ (continued from the previous page) the
date that the form was
signed. Our reversal of
the disallowance on the grounds presented
by the
Agency in this case does not preclude a further
disallowance
if the Agency determines that FFP was
claimed for a period when the
State did not have in
place a valid provider agreement with COJTC.
2/ "Inpatient hospital services" are defined as services that--
(1) are ordinarily furnished in a hospital for the care
and
treatment of inpatients;
(2) Except in the case of nurse-midwife services, as
specified
in section 440.165, are furnished under the direction of
a
physician or dentist; and
(3) are furnished in an institution that--
(i) Is maintained primarily for the care and
treatment
of patients with disorders other than tuberculosis
or
mental diseases;
(ii) Is licensed or formally approved as a hospital
by
an officially designated authority for
State
standard-setting;
(iii) Except in the case of medical supervision
of
nurse-midwife services, as specified in section
440.165,
meets the requirements for participation in
Medicare;
and
(iv) Has in effect a utilization review plan,
applicable
to all Medicaid patients, that meets the requirements
of
section 405.1035 of this chapter, unless a waiver
has
been granted by the Secretary.
42 CFR 440.10(a). (1985) (effective throughout
the period of
disallowance). - 3 -
Section 1902(a)(33)(B) of the Act. Generally, the same survey
agency
performs the surveys for both Medicare and Medicaid.
Section
1902(a)(9)(A) of the Act; 42 CFR 431.610(e). If the facility is
found
to meet the requisite state and federal standards for its class
of
providers, the survey agency certifies this to the single state
agency
(responsible for administering the Medicaid program), which may
then
enter into a Medicaid provider agreement with the certified
facility
without seeking approval from HCFA. In contrast, if a facility
is
seeking certification for Medicare purposes, the surveying
agency's
certification is forwarded to HCFA as a recommendation which the
Agency
must review and approve before the facility can be reimbursed
under
Medicare.
Background
The record demonstrates that during 1982 the State changed
the
population at COJTC from children and adolescents who had been
placed
into State custody as adjudicated juvenile delinquents to minors who
had
been adjudicated as "in need of treatment." 3/ State's Exhibit (Ex.)
7,
paragraph 13. Concurrent with this change in population, DHS took
steps
to make COJTC a component of the OTH with a view towards qualifying
the
facility for Medicaid participation. State's Ex. 12. COJTC's
policies,
staffing and physical plant were allegedly revamped to comply with
OTH
practices. State's Ex. 7. In addition, final authority for
staffing
and making medical program policy decisions for COJTC were all
placed in
a newly created position at DHS, Director for Institutional
Programs.
Id.
In November 1982 the State survey agency, the Oklahoma Department
of
Health, inspected COJTC as a component of OTH for compliance with
state
and federal regulations for hospitals. The Department of
Health
surveyed COJTC (State's Ex. 27) and provided DHS its
certification
findings, with a list of deficiencies. State's Ex.
51. On December 30,
1982, COJTC submitted a plan for correction of
certain deficiencies.
State's Ex. 29. The Department of Health licensed
COJTC as a component
of OTH from February 15, 1983 through April 30,
1985. State's Exs. 51,
53. On April 28, 1984, the Joint Committee
on Accreditation of
Hospitals (JCAH) awarded
3/ The Oklahoma statutes defined a "child in need of treatment"
as any
child who is afflicted with a substantial disorder of the
emotional
processes, thought, or cognition which grossly impairs
judgment,
behavior, capacity to recognize reality, or ability to meet the
ordinary
demands of life appropriate to the age of the child. Okla.
Stat.
Annot., tit. 10, section 1101. - 4 -
accreditation to COJTC. State's Ex. 30. On April 9, 1985,
DHS
forwarded to HCFA for the first time a separate certification
and
transmittal form (HCFA form 1539) for COJTC. as a component of
OTH.
State's Ex. 54.
The Disallowance
In its January 29, 1986 notice of disallowance, HCFA stated that
pursuant
to its look-behind authority under section 1902(a)(33)(B) of
the Act, it had
reviewed COJTC's status as a Medicaid provider and had
determined that COJTC
was not primarily engaged in providing medical
services and, furthermore, was
not a component of OTH. In its briefing
before. the Board, the Agency
substantially modified its position.
Instead of relying on section
1902(a)(33)(B), the Agency contended that
COJTC was required to be certified
by HCFA as a Medicare-qualified
facility in order to be eligible for
reimbursement in the Medicaid
program. The Agency also argued that
review authority over
Medicaid-certified facilities was inherent in the Act,
citing Smith v.
Heckler, 747 F.2d 83 (10th Cir. 1984). 4/ The Agency
maintained that
COJTC was a juvenile detention center rather than a component
of OTH
which provided inpatient hospital services.
The State argued in its briefs that a facility that sought only
Medicaid
certification needed only State certification and that, once the
State
had certified a hospital as a qualified Medicaid provider, the
Agency
had no authority to review the State certification. The State
also
contended that COJTC was providing inpatient hospital services
to
patients during the relevant time period as a state-certified
component
of OTH.
Medicare Certification as a Prerequisite to Medicaid Participation
As an independent basis for the disallowance--and as one basis for
its
authority to question COJTC's qualifications as a
Medicaid
provider--HCFA maintained that the definition of
Medicaid-reimbursable
inpatient hospital services at 42 CFR 440.10(a)(3)(iii)
requires that a
Medicaid provider must actually be certified by HCFA as a
Medicare
provider. That provision states that the services must be
provided at a
hospital that "meets the requirements for participation in
Medicare." As
previously noted, a State's survey and
4/ Since the Agency did not pursue its reliance on
section
1902(a)(33)(B) of the Act, we need not discuss the State's
contentions
concerning the proper construction of that section. - 5
-
certification of a Medicare provider, unlike that of a Medicaid
provider,
must be formally approved by HCFA for the facility to be
accepted as an
eligible provider.
The State admitted that it never sought Medicare certification for
COJTC
because all patients treated there were under 21 years old and
therefore
ineligible for Medicare. The State contended that the
regulation
required only that an institution meet the requirements
for
participation in Medicare, not that it actually participate in
Medicare.
The State therefore maintained that when a facility seeks only
Medicaid
certification, the State, not HCFA, is responsible for
determining
certifiability.
The literal language of the provision under discussion does not
support
the limitation being urged upon us by the Agency as the
correct
interpretation. This provision does not on its face require
that a
hospital be certified as a Medicare provider, only that the
facility
meet the requirements for participation in Medicare. HCFA did
not point
to any policy issuance as support for its claim here that this
provision
mandates that not only must the Medicare conditions for
participation be
met, but that HCFA approval is required as well. The
determination of a
facility's qualifications is one that the State survey
agency is
eminently well-qualified to make, as the regulations require not
only
that the same agency perform Medicaid surveys as performs
Medicare
inspections, but that the same agency staff perform both
determinations.
See 42 CFR 431.610(e)(2). Moreover, for SNFs, which,
like hospitals,
may participate in Medicare, Medicaid regulations indicate
that
certification for Medicaid may be made by either HCFA or a state
survey
agency. 42 CFR 442.200. Finally, in one instance where
HCFA approval
under the Medicare program is required for Medicaid
participation, the
Agency has so specified. See 42 CFR
440.40(a)(1)(ii)(B) ("'Skilled
nursing facility services for individuals age
21 or older, other than
services in an institution for tuberculosis or mental
diseases,' means
services that are--. . . Provided by . . . if specified in
the State
plan, a swing-bed hospital that has an approval from HCFA to
furnish
nursing facility services in the Medicare program; . . .")
(Emphasis
added). Consequently, we conclude that the regulations read
as a whole
do not make reimbursement under Medicaid for a unit of a hospital
not
providing Medicare services contingent upon HCFA approval
under
Medicare.
The Agency's "Inherent Authority" Contention
In addition to its contention that the Agency must approve a
hospital
under Medicare for it to be reimbursed for inpatient hospital
services
under Medicaid, the Agency argued that COJTC - 6 -
was improperly certified as a component of OTH, stating:
"This
disallowance is the exercise of [the Secretary's] . . . duty
to
determine the eligibility and compliance of institutions to
receive
federal Medicaid monies." Agency's Response, p. 20.
Rather than
relying on any specific statutory provision, the Agency contended
that
its authority to review COJTC's status as a component of a hospital
was
inherent in the Act, citing Smith v. Heckler. In Smith, the
court
stated:
The Secretary has a duty to ensure more than paper
compliance . . .
The "look-behind" provision and its
legislative history intended
the Secretary to be
responsible for assuring that federal Medicaid
money
is given only to those institutions that actually comply
with
Medicaid requirements.
Smith, 747 F. 2d at 589, 590. In essence, the Agency contended that
it
was not only authorized but duty-bound to recover FFP erroneously
paid
to what it maintained was a state juvenile detention center, not
a
hospital.
Although Smith can be cited for the proposition that the Secretary has
a
duty to ensure that patients in facilities receiving federal
Medicare
and Medicaid funds receive proper care, that case involved a
plaintiff's
claim that this duty compelled the Secretary to promulgate
regulations
furthering that objective, not a claim that the Secretary was
obliged or
authorized to review state Medicaid determinations.
Moreover, since the
look-behind authority discussed in Smith was section
1902(a)(33)(B),
which the Agency originally cited but has now evidently
abandoned as the
basis for this disallowance, this case is not persuasive
support for the
Agency's claim that there is implicit in the Act a general
look-behind
authority. We are not obliged, however, to consider whether
the
statutory scheme requires that the Agency permit FFP even where, as
is
alleged here, the expenditures were for a non-medical facility,
because,
as we discuss below, the Agency's contentions concerning the nature
of
this facility are unsupported in the record.
The Agency's Characterization of COJTC
Even if the Agency had identified a specific statutory or regulatory
basis
for its review of COJTC's status, the record before us does not
support the
Agency's claim that despite COJTC's licensure by the
appropriate State agency
as a component of OTH, COJTC was really a
detention facility for juvenile
delinquents during the disallowance
period and did not meet applicable
federal program requirements to be a
component of OTH. The Agency
contended that the threshold
- 7 -
test for deciding whether this facility is a component of OTH is
the
requirement that it be located in the same metropolitan area. 5/
According to the Agency, COJTC, located in Tecumseh, Oklahoma, some
50
miles from Oklahoma City, where OTH is located, fails to meet
the
geographical proximity test. Finally, the Agency argued that COJTC
was
not a component of OTH because it was not "administratively
responsible"
to OTH. Agency's Response, p. 17.
We first lay to rest the Agency's insistence that COJTC is a
juvenile
detention facility rather than a treatment center where mentally
ill
children were provided medical services under the supervision
of
physicians. As of October 1, 1982, Oklahoma law restricted placement
of
juveniles at COJTC to those who were adjudged "in need of treatment";
by
definition, such a child could not be placed into DHS care unless
a
court found that the child had a demonstrable mental illness.
Oklahoma
Stat. Annot., tit. 10 section 1116(A)(5)(b). Although,
as the Agency
indicated, this definition is included in a section of the
Oklahoma
statutes that also deals with adjudicating children as
juvenile
delinquents, that classification is clearly a separate one from "in
need
of treatment" and, as well, from "abused or neglected child," which
is
also included in that section. The affidavit of the facility's
first
director (State's Ex. 7) and a state survey agency report (State's
Ex.
31) confirm that by 1983 COJTC was in compliance with the statute;
all
children who did not meet the definition of "in need of treatment"
were
removed from the facility. In addition, COJTC's Program Manual
shows
that a patient was to be examined by a psychiatrist upon arrival
who
would establish a diagnosis and initial treatment plan for the child
on
its first day at the facility. State's Ex. 9, Chapter IV.
During the
succeeding ten days several other health professionals would
provide
their assessments so that a more thorough treatment plan could
be
established. COJTC's 1984 accreditation by the JCAH (State's Ex. 30)
6/
and sample
5/ A "component" of a hospital is defined in the HCFA State
Operations
Manual (SOM) as an additional facility, geographically separated
but in
the same metropolitan area, united under common ownership, with a
single
Chief Medical Officer, single Chief Executive Officer and a
totally
integrated medical staff. SOM section 2024.
6/ The Agency claimed that the JCAH accreditation pertained only
to a
program at COJTC, not the entire facility. This is not accurate,
since
the actual certificate of accreditation is not so limited. See
State's
Ex. 30. Moreover, the State is not claiming that the facility
should
receive deemed status under section 1865 of the Act. - 8 -
medical records from patients (State's Exs. 47, 48) provide
further
unrefuted support for the conclusion that the facility was
treating
mentally ill juveniles.
As for the Agency's argument that COJTC is not a component of OTH,
we
conclude that the requirement of geographical proximity is not
a
threshold test, as claimed by the Agency, but merely one of
several
considerations cited by the SOM for determining whether a facility
was
so integrated with another that it should be considered a component
of
the other facility. 7/ Even if geographical proximity were an
absolute
requirement, we find this condition to be met. In its briefs,
the State
pointed out that the metropolitan statistical area of Oklahoma
City
includes Tecumseh and that the JCAH considers a 100-mile radius as
being
a reasonable geographic area for accredited multi-facility
providers.
State's Exs. 44, 45, 46. HCFA did not contest these
statements.
The Agency also has not seriously contested the extensive
documentation
provided by the State showing that COJTC's policies and
procedures were
revised in 1982 to comply with and become subordinate to
those of OTH
and that COJTC was certified as a component of OTH by the State
survey
agency. In finding that COJTC was not a component of OTH the
Agency
failed to define anywhere "administratively responsible," the
criterion
upon which it relied, nor did it indicate which of the four
components
listed in the SOM--common ownership, single Chief Medical
Officer,
single Chief Executive Officer, and totally integrated
medical
staff--this criterion falls under. The Agency did argue that
some of
the various organizational charts extant during the disallowance
period
show COJTC as subordinate to the Division of Children and Youth
Services
(DCYS) rather than OTH. Agency's Ex. N2, N3, and N4. 8/ We
find,
however, that COJTC was under common "ownership" with OTH, in that
both
were subject to the control and direction of the same governing
body,
the Oklahoma Human Services Commission, which was ultimately
responsible
for the operational decisions of the entire hospital
enterprise.
COJTC's Chief of Staff of the Institutional Medical Programs
reported to
the Executive Chief of Staff for OTH (later known as the
Medical
Director), who reported directly to the
7/ Although the SOM cautions that a facility may be so distant as
to
make it impossible to operate as a component of a single hospital,
there
is not as explicit a requirement of geographical proximity as there
is,
for example, for a single Chief Medical Officer.
8/ An additional organizational chart cited by the Agency was
not
pertinent to the disallowance period. - 9 -
governing body and was ultimately responsible for all medical
staff
activities, including, e.g., approval of applications for
staff
privileges. In addition, both COJTC and OTH were ultimately
responsible
to the same Chief Executive Officer, the Director of Human
Services.
Even if, as the State conceded, management of COJTC
administrative
matters was shared by DCYS, with OTH exercising medical and
professional
supervision over the facility, both DCYS and OTH were
ultimately
responsible to the Director of Human Services. In addition,
COJTC was
consistently certified by the state survey agency as a component of
OTH.
9/
The Agency did not contest any of the materials furnished. by the State
in
support of its claim that during 1982 COJTC was systematically
brought under
OTH policies and authority. We therefore conclude that
the Agency's
characterization of COJTC is not supported by the record.
Conclusion
Based on the foregoing, we conclude that the disallowance cannot
be
sustained on the basis relied on by the Agency in this proceeding.
________________________________ Judith A. Ballard
________________________________ Alexander G. Teitz
________________________________ Donald F. Garrett
Presiding
Board Member
9/ The Agency made much of the fact that one of the state
certification
forms indicates that the COJTC's beds were not included in the
count of
Medicare-certified beds. There is no indication, however, that
the
certifying agency was excluding COJTC's beds from Medicaid
certification
and, as we held above, Medicare certification was not necessary
for
COJTC to qualify as a Medicaid provider.