SUBJECT:

Heart Place Hospital, L.P.,

Petitioner,

Centers for Medicare & Medicaid

DECISION

This matter is before me on the Centers for Medicare & Medicaid Services's (CMS's) Motion for Summary Judgment. The parties have submitted memoranda and exhibits in support of their positions and I have reviewed their pleadings carefully. Having done so, I find that no material facts remain in dispute and conclude that CMS's position is correct as a matter of law. I therefore grant CMS's Motion and thus summarily affirm CMS's determination to approve Petitioner's participation as a hospital under the Medicare program effective March 19, 2002, but not earlier.

PROCEDURAL BACKGROUND

Petitioner, Heart Place Hospital, L.P., is a 16-bed short-term private hospital located in Midland, Texas. The facility was licensed as a hospital by the Texas Department of Health (TDH) on December 13, 2001, began operating as a hospital on December 17, 2001, and was informed by CMS, on April 8, 2002, that CMS had approved its participation in the Medicare program as an acute-care hospital effective March 19, 2002. This date corresponded to Petitioner's successful completion of a compliance survey of the facility conducted by TDH's Health Facility Compliance Division.

Petitioner responded to CMS's notification on May 24, 2002, by requesting that CMS reconsider its determination of the March 19, 2002 effective date. It was Petitioner's position that the effective date of its approval for Medicare participation should be earlier. Petitioner maintained that it was entitled to an effective date of December 17, 2001, and that predicating the effective certification date on the March 19, 2002 completion of the compliance survey improperly delayed the approval of the facility to its financial detriment.

CMS replied to Petitioner's request on June 10, 2002 in a letter that acknowledged Petitioner's concern but declared CMS unable to agree to the earlier effective date. The letter also explained Petitioner's entitlement to seek appellate review of CMS's determination and outlined the basic procedures it must observe in perfecting such an appeal.

Petitioner timely sought review of CMS's determination in a letter of June 25, 2002. The sufficiency of Petitioner's hearing request has not been challenged and no other jurisdictional issues have been raised or become apparent to me, except in the very narrow sense discussed near the conclusion of this decision.

CMS submitted six exhibits, CMS Exhibits (Exs.) A - F, with its Motion and Brief dated December 20, 2002. Petitioner has not objected to the admission of these exhibits, and I now admit CMS Exs. A - F into the record. I note that CMS's method of designating its exhibits, by letter rather than by number and omitting page numbers, is in compliance neither with Paragraph 3 of Civil Remedies Division Procedures nor with my Order of November 19, 2002.

Petitioner submitted a single exhibit, Petitioner Exhibit (P. Ex.) 1, with its Response dated January 23, 2003. CMS has objected to this single exhibit on the basis of its relevance. CMS argues that P. Ex. 1 is actually the exposition of an argument in Petitioner's favor, but is not an assertion which would make the existence of any fact or facts material to my decision more or less likely. While CMS's position may be strictly correct, I overrule its objection and admit P. Ex. 1 into the record, subject to the brief discussion of it below. The record of this case as thus constituted reveals that there are no material facts in dispute.

Because I believe that CMS's Motion for Summary Judgment is supported by those settled material facts and by the well-established law of this forum, I grant CMS's Motion, and thereby sustain CMS's determination to approve Petitioner's participation in the Medicare program effective March 19, 2002.

ISSUE

The legal issue before me is narrow. It is, simply, whether Petitioner is entitled to approval as a Medicare provider effective as of any date prior to March 19, 2002?

This legal issue has been addressed in a variety of factual settings by several other Administrative Law Judges (ALJs), by appellate panels of the Departmental Appeals Board (DAB), and most recently, by me. Although some of those factual settings may have differed slightly from the present one in certain details, none have differed in such a way as to establish an exception to this forum's well-settled rule that requires that I find that Petitioner is not entitled to approval or certification as a Medicare provider on any date prior to March 19, 2002.

CONTROLLING STATUTES AND REGULATIONS

The terms under which most health-care providers qualify to participate in the Medicare program are based on a process of application, agreement, and approval. Save for certain exceptions not relevant here, payments under the Medicare program may be made only to providers enjoying eligible status based on a provider agreement approved under Section 1814(a) of the Social Security Act (Act), 42 U.S.C. §§ 1395f(a). The broad criteria for approval are set out in Section 1866 of the Act, 42 U.S.C.§ 1395cc. Although the statute establishes the general scheme by which individuals and facilities may establish approved provider agreements and thereby qualify to deliver and be compensated for Medicare services, the implementing regulations and details of the program are set out in 42 C.F.R. § 482, Subparts A - E, §§ 482.1 - 482.66.

Virtually all aspects of professional or institutional participation in the Medicare program are governed by the survey, certification, and enforcement procedures set out at 42 C.F.R. § 488, Subparts A - F, §§ 488.1 - 488.456. Compliance with these detailed provisions of the Medicare program is the heart of the agreement contemplated by Sections 1814(a) and 1866 of the Act. The regulation at 42 C.F.R. § 488.1 classifies most healthcare-delivery entities as "providers" or "suppliers." Hospitals are classified as "providers."

Thus, in order to qualify as an approved provider of Medicare services, a hospital must have an approved agreement, and in order for its agreement to be approved the hospital must be surveyed on-site by an agency authorized by CMS to do so, in order that its compliance with the requirements of the Medicare program can be assessed and certified. 42 C.F.R. §§ 489.2(b)(1) and 489.10(a). Until a hospital has been so assessed and certified, and until its agreement has been approved based on that assessment, its status is that of "prospective provider." 42 C.F.R. § 498.2.

When the agency has completed its on-site survey, it reports the results and its recommendations to CMS. 42 C.F.R. § 488.11(a). The agency's report may include recommendations regarding the effective date of the hospital's approved status based on the criteria set out in 42 C.F.R. § 489.13(b). 42 C.F.R. § 488.11(d). On the basis of the agency's report and recommendations, CMS will determine whether the hospital is eligible to participate in or be covered by the Medicare program. 42 C.F.R. § 488.12(a)(1). Generally, the earliest date on which a provider may be certified by CMS to participate in Medicare is established by 42 C.F.R. § 489.13(b):

(b) All federal requirements are met on the date of the survey.

The agreement or approval is effective on the date the survey (including the Life Safety Code survey, if applicable) is completed, if on that date the provider or supplier meets all applicable Federal requirements as set forth in this chapter.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

I find and conclude as follows:

1. At all material times, Petitioner, Heart Place Hospital, L. P., was a 16-bed hospital facility located in Midland, Texas. CMS Exs. A, B, C, D.

2. At all material times, Petitioner sought to qualify for participation in the Medicare Part A program as a hospital provider pursuant to Sections 1814(a) and 1866 of the Act, 42 U.S.C. §§ 1395f(a) and 1395cc, and 42 C.F.R. § 489.2(b)(1). CMS Ex. A.

3. Petitioner was issued a license to operate and maintain a hospital by the TDH on or about December 13, 2001.

4. In order to qualify in the Medicare program as a hospital provider, Petitioner was subject to the on-site survey requirements of 42 C.F.R. § 489.10(a).

5. On or about January 3, 2002, CMS's Medicare Part A fiscal intermediary recommended approval of Petitioner's application for participation in the Medicare program and wrote to the TDH that the "next step of the enrollment process involves a site visit or survey conducted by the State Survey Agency . . . " CMS Ex. B.

6. The TDH completed its on-site survey of Petitioner's facility on March 19, 2002. CMS Ex. C.

7. On April 8, 2002, CMS notified Petitioner that it had approved its application for participation in the Medicare program as a provider hospital with an effective date of March 19, 2002. CMS Ex. E.

8. The earliest date on which Petitioner was eligible to be certified by CMS as a provider hospital in the Medicare program was March 19, 2002. 42 C.F.R. § 489.13(b).

9. CMS was without authority or discretion to establish an earlier effective date for Petitioner's certification and approval, and its action in determining March 19, 2002 to be the effective date was in all respects proper.

10. There are no remaining disputed issues of material fact in this appeal, and summary judgment is therefore appropriate in this matter.

DISCUSSION

The sequence of events leading to this appeal is straightforward and brief. Only a few details are missing or unclear, and they neither alter nor have the potential for altering the analysis and result I announce here.

Petitioner obtained a State of Texas license as a hospital on or about December 13, 2001. Although there is no direct evidence of this date before me, the parties' positions make it clear that the date Petitioner learned that its license had been issued by TDH--December 17, 2001--is the date on which Petitioner believes it became entitled to participate in the Medicare program and to be paid for services otherwise covered by the program.

The State health authorities did not conduct their survey of Petitioner's facility immediately upon the issuance of the license. The record before me establishes that CMS's fiscal intermediary wrote to the TDH Division responsible for on-site compliance surveys on or about January 3, 2002 and informed that Division that the next step in the approval process was such a survey. CMS Ex. B. No reason for the delay of somewhat more than two months following the letter appears in the record, but is clear that the Division conducted its on-site survey on March 18 and 19, 2002. The hospital was found to be in substantial compliance with Medicare requirements, and the surveyors promptly recommended Petitioner's certification as a Medicare participant. CMS Ex. A.

On April 8, 2002, CMS notified Petitioner that the facility had been certified for participation in the Medicare program effective March 19, 2002, a date that corresponds with the completion of the State survey. CMS Ex. E. Petitioner wrote to CMS on May 24, 2002 to seek reconsideration of the effective certification date. CMS Ex. F. When CMS, on June 10, 2002, declined to adopt the date proposed, Petitioner timely filed this appeal on June 25, 2002.

It is the period between mid-December 2001 and March 19, 2002 which lies at the heart of this appeal. Petitioner asserted then, and still asserts, that the facility should have been entitled to participate in the Medicare program once it was licensed by the State of Texas. Petitioner asserts that it was led so to believe by statements it attributes to CMS personnel and employees of the fiscal intermediary. CMS Ex. F; Petitioner Hearing Request, June 25, 2002; Petitioner Report of Readiness, November 5, 2002; Petitioner Response, January 25, 2003. Explicit in Petitioner's assertion is the financial loss it incurred because services it provided between mid-December 2001 and March 19, 2002 were ineligible for Medicare reimbursement. It will be noted, however, that Petitioner has offered no direct evidence of the statements it attributes to CMS and its fiscal intermediary, no direct evidence of its own reliance on such statements, no direct evidence of its losses, and no direct assertion that the existence of any such statements or losses is a material fact still in dispute.

CMS responded to Petitioner's May 24, 2002 letter promptly and carefully, and just as promptly and carefully denied any of the statements Petitioner attributes to it. CMS Ex. F. CMS expressed itself as bound by regulation to deny Petitioner's request to establish an earlier effective date. It was bound by regulation to establish the effective date as the date on which the facility successfully "passed" the survey, and I am bound by regulation and recognized precedent to affirm that date. 42 C.F.R. § 489.13(b).

The terms of 42 C.F.R. § 489.13(b) are unambiguous. "The agreement or approval is effective on the date the survey . . . is completed, if on that date the . . . supplier meets all applicable Federal requirements as set out in this chapter." 42 C.F.R. § 489.13(b). It is true that another ALJ has observed of this direct language that "[t]he governing regulations are essentially unforgiving," (Tenet HealthSystem Philadelphia, Inc., DAB CR663 at 7 (2000)), but the regulation remains the touchstone in this debate and the ratio decidendi of this appeal. It establishes the success of the provider in satisfying on-site surveyors of its compliance with all applicable Medicare requirements as the necessary condition for certification, and it does not contemplate retroactive satisfaction through some other mechanism.

Thus, the fact that State authorities issued a license to Petitioner's facility has absolutely no bearing on the effectuation, timing, or results of a Medicare-standards compliance survey, or on the evaluation of any such survey by CMS. Arbor Hospital of Greater Indianapolis, DAB No. 1591 (1996). The proof of a license is simply not a valid substitute or alternative to survey. Nor does the possibility that in December 2001 Petitioner was in every way ready to undergo inspection successfully alter the imperative that the survey must verify compliance. GranCare Home Health Service & Hospice, DAB CR464 (1997). The plainest statement of this rule may be found in the language employed by the Chief ALJ when she made the point in Wells House, DAB CR714 at 9 (2000) that "HCFA (now CMS) cannot base Medicare certification on a State licensing survey or on the date a State license was issued." See generally Central Suffolk Hospital v. Shalala, 841 F. Supp. 492 (E.D.N.Y. 1994).

The near-categorical effect of the regulation was recognized in this forum as early as SRA, Inc., D/B/A St. Mary Parish Dialysis Center, DAB CR341 (1994). In that case, a series of surveys and re-surveys took place against the background of the facility's insistence that it had corrected some identified deficiencies and that others did not in fact exist. The facility argued, inter alia, that the surveyors' alleged delay in reporting some of those deficiencies resulted in the facility's inability, through no fault of its own, to address and correct them. The facility went on to assert that the effective date of its certification ought not be delayed until the date of the final survey, since that survey itself was dilatory. That argument was directly considered and squarely rejected. After thoughtful analysis, the ALJ ruled that the date identified by 42 C.F.R. § 489.13(b) is the earliest date on which certification can be made, and that neither CMS (then HCFA) nor an ALJ can apply principles of equity to make an earlier date effective.

The ruling in SRA provided the framework for one DAB decision and four subsequent ALJ decisions important to the instant case. An appellate panel of the DAB in Arbor Hospital, supra, emphasized that "the regulations require that the survey process must be utilized to examine a facility's compliance with the applicable program requirements," and went on to cite the specific regulation under discussion here and state that "the regulations at 42 C.F.R. § 489.13(b) provide that a provider agreement may not become effective until a facility has been found to meet all federal health and safety conditions of participation. Thus, we conclude that in the absence of a survey to determine whether Petitioner was in compliance . . . HCFA lacked authority to give Petitioner an earlier effective date." Arbor Hospital at 7 - 8. The clear sense of the decision in Arbor Hospital is that while CMS or HCFA may legitimately make an effective date retroactive to the date of a "successfully-passed" survey, it must first have the completed survey to review and must then review it in light of CMS's own statutory and regulatory mandates. Put another way, once SRA and Arbor Hospital had been decided, it was clear that CMS or HCFA could not certify a facility's effective date until it had reviewed a survey, that CMS or HCFA must review that survey with reference to the appropriate federal requirements, and that without the "successful" completion of a Medicare compliance survey there was simply no evidence that a facility was in compliance with Medicare standards. Also, SRA and Arbor Hospital announced as a corollary to that rule that even in circumstances where the survey had been substantially delayed through no fault of the facility, neither the doctrine of estoppel nor any other equitable remedy would entitle the facility to claim an earlier effective date. The central importance of CMS's review of the survey, and the unavailability of estoppel as a remedy for the effects of a delayed survey, were both re-emphasized by the Chief ALJ in Wells House, supra.

The doctrine and corollary laid down in SRA and Arbor Hospital were soon applied in circumstances remarkably like those before me now. The principles that dispose of the instant controversy are found in the quartet of cases of GranCare Home Health Service & Hospice, supra; Renal Services Group of El Centro, DAB CR482 (1997); Therapeutic Rehabilitation Centers, Inc.,, DAB CR531 (1998); and Surgery Center of Southwest Kansas, DAB CR619 (1999). In those four cases, one may find an amalgam of facts that encompass those at hand, and may find arguments based on those facts and identical to Petitioner's here, all of which were rejected by the ALJs who heard them. Those four decisions leave no room for misunderstanding. Neither CMS nor an ALJ enjoys the authority to look behind the completion date of an on-site compliance survey and establish an effective approval date at some earlier time, even if the survey itself were delayed unreasonably, unconscionably, or perhaps unlawfully; no doctrine related to or deriving from estoppel can compel or bind CMS to any other date, even when, as here, a party vigorously asserts that CMS or its contractors misled it by promising otherwise.

In this case, Petitioner argues not so much that it suffered loss because the survey was greatly delayed. Rather, Petitioner insists that it acted on assurances given by CMS personnel and employees of the fiscal intermediary to the effect that it would receive Medicare reimbursement for services provided between December 2001 and the completion of the March 19, 2002 compliance survey. Petitioner relies on the equitable doctrines of estoppel and unjust enrichment in support of its position: Petitioner argues that CMS should be estopped from denying payment for services it provided during the contested period, and CMS should not be unjustly enriched by permitting it to deny payment.

There is no evidence of any such inaccurate or incorrect statements or assurances in this record. If it were material to my decision that I decide whether they were made, I would find that they were not. But whether such statements were made, whether Petitioner reasonably relied on them to its detriment, and what the amount of non-reimbursed services involved might be, are not issues of material fact requiring resolution. Those questions do not raise issues of material fact because, however I might resolve them, they could not alter the fundamental rule that estoppel and related equitable remedies do not lie against CMS or any other agency of the United States government. No matter how egregious the misstatements (and none have been described in detail), and no matter how persuasive Petitioner's proof of them might be (and none has been offered), they would be immaterial under a well-settled body of law most recently elucidated in Danville HealthCare Surgery Center, DAB CR892 (2002).

In Danville, the ALJ reviewed the debate on the application of equity principles in this forum over more than two decades. She began her discussion with Office of Personnel Management v. Richmond, 496 U.S. 414 (1990) and examined New Life Plus Center, CMHC, DAB CR700 (2000) and Ophthalmology Ltd. Eye Surgery, DAB CR658 (2000), as well as Tenet, supra, and GranCare, supra. Her analysis of these authorities and of the many other decisions on which they in turn relied led her to reaffirm the rule shaped in Schweiker v. Hansen, 450 U.S. 785 (1981) and enunciated in Surgery Center of Southwest Kansas, supra, that "erroneous information from government employees does not give rise to estoppel against the government or entitle the recipient of the incorrect information to monetary payments not otherwise permitted by law." Danville, supra, at 7. Accord, Maher A. A. Azer (Florence Dialysis Center, Inc.), DAB CR994 (2003).

On the facts before me, CMS correctly established the date of the completed survey, March 19, 2002, as the effective date of the Heart Place Hospital's approval as a hospital provider in the Medicare program. With the application of the rule I have discussed to these facts, there remains only one additional point to discuss.

In its Response to CMS's Motion for Summary Judgment, Petitioner advances a new theory by which it seeks to recover the costs of services it provided between mid-December 2001 and March 19, 2002. The only exhibit offered by Petitioner is a July 29, 2002 letter from its consultant L. Lockhart to a CMS official, in which Petitioner proposes that the hospital's services during that time might be reimbursable as emergency services furnished by a non-Medicare-participating hospital pursuant to 42 C.F.R. 424 Subpart G, §§ 424.100 - 109. P. Ex. 1. This theory is advanced for the first time in Petitioner's January 23, 2003 Response. It does not appear in Petitioner's November 5, 2002 Report of Readiness, nor in Petitioner's June 25, 2002 Hearing Request. It was not mentioned on May 24, 2002 in Petitioner's first recorded objection to the effective date. As noted above, I have admitted P. Ex. 1 to the record, but my purpose in doing so is simply to permit the following brief discussion to go forward in an informed way.

The purview of this appeal is limited to the actions taken below, the facts placed before me, and the issues raised pursuant to 42 C.F.R. § 498.40. Petitioner has shown no action or determination by CMS under Subpart G which would permit an appeal by way of 42 C.F.R. § 424.104(d). Its Hearing Request filed pursuant to 42 C.F.R. § 498.40(b) cannot, by the most generous reading, be understood to raise an issue relating to Subpart G. As late as now, Petitioner has not suggested facts amounting to a minimal adumbration of a claim to reimbursement for even some of its services under Subpart G, although it clearly had considered the idea soon after it filed its Hearing Request and well before it submitted its Readiness Report. Under the circumstances, I can descry no reason whatsoever to exercise my discretion to permit the filing of a new Hearing Request pursuant to 42 C.F.R. § 498.40(c), or to add, at this late hour, a new issue to this appeal pursuant to 42 C.F.R. § 498.56. Accordingly, I decline to consider Petitioner's argument based on 42 C.F.R. Subpart G, §§ 424.100 - 109.

CONCLUSION

For the reasons set forth above, I grant summary judgment in favor of CMS, and thereby affirm CMS's determination to approve Petitioner's participation as a hospital in the Medicare program effective March 19, 2002 but not sooner, pursuant to the terms of 42 C.F.R. § 489.13(b).

Richard J. Smith
Administrative Law Judge