Center for Organ Recovery and Education, CR No. 313 (1994)

$05:Civil Money Penalty

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: Center for Organ Recovery and Education, Petitioner,
- v. -
Health Care Financing Administration.

DATE: May 3, 1994

Docket No. C-94-020
Decision No. CR313

DECISION

On October 29, 1993, Petitioner, the Center for Organ Recovery &
Education (CORE), filed a request for a hearing pursuant to 42
C.F.R. Part 498. 1/ CORE asserted that it was a qualified organ
procurement organization ("OPO"), and, therefore, a "supplier" of
health care items or services as defined by 42 C.F.R. 498.2.
CORE averred that it had applied in 1992 to the Health Care
Financing Administration ("HCFA") for designation as the OPO for
the entire State of West Virginia, with the exception of one county
served by a Kentucky-based OPO. In its request for hearing, CORE
asserted that HCFA had approved CORE's application to serve as an
OPO for the entire state of West Virginia, the only exceptions
being that HCFA had denied CORE's application with respect to nine
counties in southern and eastern West Virginia, four counties in
the northern panhandle of West Virginia and one county in the
eastern panhandle of West Virginia. HCFA had allocated the nine
counties in southern and eastern West Virginia to a Virginia-based
OPO. HCFA had allocated the four northern panhandle counties and
one eastern panhandle county to an Ohio-based OPO.

CORE averred that HCFA had denied CORE's request for
reconsideration of its application for all of the counties
mentioned above. Therefore, according to CORE, it was entitled to
a hearing pursuant to 42 C.F.R. 498.5(d)(2), to contest HCFA's
determination to award the 14 counties in West Virginia which it
had not awarded to CORE to OPOs other than CORE.

The case was assigned originally to Administrative Law Judge
Charles Stratton. On December 16, 1993, Judge Stratton held a
prehearing conference in which the parties participated by
telephone. On January 13, 1994, Judge Stratton issued a prehearing
order, based on the issues discussed at the prehearing conference.
Order and Schedule for Filing Briefs and Documentary Evidence,
January 13, 1994. The order identified a number of issues and
directed the parties to brief those issues. Id. at 4 - 5. In
accordance with that Order, the parties filed the following: On
February 4, 1994, HCFA filed a motion for summary disposition; on
March 7, 1994, Petitioner filed an opposition to HCFA's motion; and
on March 22, 1994, HCFA filed a reply brief. 2/
On March 9, 1994, the case was reassigned to me. On March 28,
1994, I conducted a telephone conference at which I heard oral
argument as to the issues which Judge Stratton had identified and
as to additional issues which I identified during the conference.
I provided the parties the opportunity to file supplemental briefs
concerning the additional issues which I identified. These were
filed by the parties on April 8, 1994.

I have considered the applicable law, the parties' arguments, and
the undisputed material facts. I conclude that CORE withdrew its
request for a hearing concerning HCFA's allocation of the three
West Virginia counties of Marshall, Mineral, and Ohio to an OPO
other than CORE. P. Opp. at 3 - 4, n. 3. 3/ I dismiss
Petitioner's request for a hearing concerning those three counties,
pursuant to 42 C.F.R. 498.68(a) and (b). I conclude that CORE
is not entitled to a hearing concerning HCFA's determination to
allocate the West Virginia counties of Brooke and Hancock to an OPO
other than CORE. I dismiss Petitioner's request for a hearing
concerning those two counties, pursuant to 42 C.F.R. 498.70(b).

I conclude that HCFA did not consider CORE's request for
reconsideration concerning the remaining nine West Virginia
counties which HCFA awarded to another OPO pursuant to the
standards for reconsideration contained in 42 C.F.R. 498.24(a)
and (b). Accordingly, I am vacating HCFA's reconsideration
determination and remanding this case to HCFA in order that it may
reconsider CORE's application in accordance with the standards
contained in section 498.24(a) and (b).

ISSUES

The issues in this case are whether:

1. There is a need in this case for an evidentiary hearing
involving live testimony.

2. CORE withdrew its request for a hearing concerning whether
HCFA should have allocated the West Virginia counties of Marshall,
Mineral, and Ohio to CORE.

3. CORE is entitled to a hearing concerning whether HCFA
should have allocated the West Virginia counties of Brooke and
Hancock to CORE.

4. HCFA applied the criteria contained in 42 C.F.R.
498.24(a) and (b) to decide CORE's reconsideration request.

5. Assuming HCFA failed to apply the criteria contained in 42
C.F.R. 498.24(a) and (b) to decide CORE's reconsideration
request, do I have authority to direct a remedy, and if so, what
authorized remedy is appropriate here.

The parties raise additional issues. CORE asserts that it is
entitled to a de novo hearing which, in effect, supersedes the
initial and reconsideration determinations made by HCFA. CORE
contends that I should join as parties to this case other OPOs who
submitted competing applications for portions of West Virginia. It
argues that it should be provided the opportunity to take
discovery, including depositions, of HCFA officials. Although
these additional issues are not central to my decision, I discuss
them herein.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. CORE is an agency which procures organs for transplant. See
HCFA Ex. 11; P. Ex. 1 at 1. 4/

2. Prior to October, 1991, Mountain State Organ Procurement Agency
(MSOPA) had been approved by HCFA to serve as an OPO in a service
area which included portions of the State of West Virginia. HCFA
Exs. 11, 12; P. Ex. 4.

3. Effective September, 1991, MSOPA ceased operating in West
Virginia, and CORE entered into an agreement with MSOPA to assume
all of the activities previously conducted by MSOPA in West
Virginia. HCFA Ex. 11 at 1.

4. On October 18, 1991, CORE notified HCFA that it had assumed the
activities previously conducted by MSOPA and applied for approval
from HCFA to conduct its activities in the counties in West
Virginia that were previously served by MSOPA. HCFA Ex. 11.

5. In its October 18, 1991 application to HCFA, CORE identified
the counties previously served by MSOPA as: Barbour, Brooke,
Doddridge, Fayette, Gilmer, Greenbrier, Hancock, Harrison, Lewis,
McDowell, Marion, Marshall, Mercer, Monogalia, Monroe, Nicholas,
Ohio, Pocahontas, Preston, Raleigh, Randolph, Ritchie, Summers,
Taylor, Tucker, Tyler, Upshur, Webster, Wetzel, and Wyoming. HCFA
Ex. 11.

6. In a letter dated December 5, 1991, HCFA advised CORE that it
was giving CORE temporary authority, effective October 18, 1991, to
assume the organ procurement activities of MSOPA. HCFA Ex. 12; P.
Ex. 4.

7. In the December 5, 1991 letter, HCFA advised CORE that, before
it could designate a replacement OPO for MSOPA, it was required to
consider applications from all entities which applied to replace
MSOPA. HCFA Ex. 12; P. Ex. 4.

8. In the December 5, 1991 letter, HCFA advised CORE that it would
shortly issue a public notice that the MSOPA service area would be
an "open" service area for consideration of applications from OPOs
to service that area, and that HCFA would accept CORE's October 18,
1991 letter as a statement of its intention to compete to be the
OPO for the specific counties which had been served by MSOPA. HCFA
Ex. 12; P. Ex. 4.

9. In the December 5, 1991 letter, HCFA advised CORE that the West
Virginia counties of Brooke and Hancock were not part of the MSOPA
service area, but were part of a Metropolitan Statistical Area that
had been assigned to another OPO, Lifeline of Ohio Organ
Procurement Organization ("LOOP"). HCFA Ex. 12; P. Ex. 4.

10. In the December 5, 1991 letter, HCFA advised CORE that it
could not permit the West Virginia counties of Brooke and Hancock
to be part of the interim agreement between CORE and MSOPA. HCFA
Ex. 12; P. Ex. 4.

11. CORE received a copy of the December 5, 1991 letter from HCFA
in early January 1992. HCFA Ex. 14; P. Ex. 4. 5/

12. In a letter dated December 11, 1991, HCFA advised CORE that it
had designated LOOP to be the OPO for the Steubenville-Weirton
Ohio-West Virginia Metropolitan Statistical Area. HCFA Ex. 8; P.
Ex. 2.

13. CORE received the December 11, 1991 letter from HCFA. P. Ex.
2.

14. The Steubenville-Weirton Ohio-West Virginia Metropolitan
Statistical Area includes the West Virginia counties of Brooke and
Hancock. P. Ex. 1; HCFA Ex. 8.

15. CORE knew no later than January 2, 1992 that HCFA had not
given it approval to operate in Brooke and Hancock counties and
that Brooke and Hancock counties were not part of MSOPA's service
area. Findings 9 - 14.

16. In December 1991, HCFA published a notice which formally
notified interested parties that there was an open service area for
an OPO, consisting of all counties in West Virginia except Mineral,
Hancock, Brooke, Ohio, Marshall, Cabell, Wayne, and Wood. HCFA Ex.
13.

17. The December 1991 notice invited interested parties to apply
to be the OPO for the open service area and established a January
31, 1992 deadline for applications. HCFA Ex. 13.

18. On January 2, 1992, CORE advised HCFA that it was modifying
its application, so that it would consist of an application for
approval by HCFA to serve as the OPO for all counties in West
Virginia served previously by MSOPA. HCFA Ex. 14; P. Ex. 4.

19. On January 28, 1992, LOOP applied to HCFA for designation as
the OPO for the service area in West Virginia previously designated
to MSOPA. HCFA Ex. 16. 6/

20. On January 29, 1992, the Virginias' Organ Procurement Agency
(VOPA) applied to HCFA for designation as the OPO for the West
Virginia counties of Morgan, Jefferson, Fayette, Monroe, Mercer,
Berkeley, Raleigh, Greenbrier, and Summers. HCFA Ex. 18. 7/

21. On July 21, 1992, HCFA advised CORE that it was approving its
application as the OPO for all counties in the West Virginia open
service area vacated by MSOPA, except the nine counties of Morgan,
Jefferson, Fayette, Monroe, Mercer, Berkeley, Raleigh, Greenbrier,
and Summers. HCFA Ex. 28 at 1 - 2. 8/

22. HCFA advised CORE that it and VOPA met the basic requirements
contained in 42 C.F.R. 485.304 to qualify an entity as an OPO.
HCFA Ex. 28 at 1 - 2.

23. HCFA advised CORE that, under 42 C.F.R. 485.308, the
Secretary of the United States Department of Health and Human
Services (the Secretary) may designate only one OPO for any service
area. HCFA Ex. 28 at 1 - 2.

24. HCFA advised CORE that where two or more OPOs apply for the
same service area, and where both meet the basic qualifying
requirements for OPOs, HCFA is required to determine the best
qualified OPO for the service area by applying tie-breaker factors
contained in 42 C.F.R. 485.308. HCFA Ex. 28 at 1 - 2.

25. HCFA advised CORE that it had applied the tie-breaker factors
for the nine West Virginia counties at issue and had determined
that VOPA was better qualified to serve as the OPO for the nine
West Virginia counties of Morgan, Jefferson, Fayette, Monroe,
Mercer, Berkeley, Raleigh, Greenbrier, and Summers. HCFA Ex. 28 at
1 - 2.

26. HCFA advised CORE that it could apply for reconsideration of
HCFA's determination, pursuant to 42 C.F.R. Part 498. HCFA Ex. 28
at 1 - 2.

27. On October 26, 1992, CORE filed a request for reconsideration
with HCFA. ALJ Exs. 1, 2. 9/

28. In its request for reconsideration, CORE presented facts
concerning its performance in West Virginia both prior and
subsequent to January 31, 1992. ALJ Exs. 1, 2.

29. On August 31, 1993, HCFA advised CORE that it was denying its
request for reconsideration. HCFA Ex. 37.

30. In its denial, HCFA informed CORE that it did not consider to
be relevant to the reconsideration facts concerning CORE's
performance in West Virginia after January 31, 1992. HCFA Ex. 37.

31. Reimbursement may be made under Medicare or Medicaid to an
agency which procures organs for transplant only if that agency
meets the qualifications for an OPO set forth in section 1138(b) of
the Social Security Act and is designated by the Secretary as an
OPO. Social Security Act, section 1138(b)(1); see, section 371(b)
of the Public Health Service Act.

32. The Secretary may not designate more than one OPO for each
service area within which an OPO may operate. Social Security Act,
section 1138(b)(2); 42 C.F.R. 485.308(a).

33. Where more than one qualified OPO applies for a designated
service area, the Secretary (or her delegate, HCFA) will consider
additional factors and will allocate the service area based on a
comparison of the OPOs, using those factors as a basis for
comparison. 42 C.F.R. 485.308(a).

34. The factors that HCFA will consider in deciding which OPO will
be awarded a designated service area where more than one qualified
OPO applies for that service area consist of:

(1) Prior performance by each OPO, including the previous
year's experience in terms of the number of organs retrieved and
wasted and the average cost per organ;

(2) Actual number of donors compared to the number of
potential donors;

(3) The nature of relationships and the degree of involvement
by each OPO with hospitals in that OPO's service area;

(4) Bed capacity associated with the hospitals with which the
OPOs have working relationships;

(5) The willingness and ability of each OPO to place organs
within the designated service area;

(6) The proximity of each OPO to donor hospitals.

42 C.F.R. 485.308(a)(1) - (6).

35. An organization that applies to HCFA to be the designated OPO
for a service area, which is not designated by HCFA for that
service area, has no statutory right to a hearing. See, Social
Security Act, section 1138(b).

36. An organization that applies to HCFA to be the designated OPO
for a service area, which is not designated by HCFA for that
service area, may appeal its non-designation under the regulations
contained in 42 C.F.R. Part 498. 42 C.F.R. 485.308(b).

37. An OPO is a "supplier" within the meaning of the regulations
contained in 42 C.F.R. Part 498. 42 C.F.R. 498.2.

38. HCFA's determination to allocate the part of MSOPA's service
area to CORE and part of MSOPA's service area to VOPA was an
"initial determination" within the meaning of 42 C.F.R.
498.20(a).

39. CORE was entitled to apply for reconsideration of HCFA's
initial determination. 42 C.F.R. 498.22(a).

40. The West Virginia counties of Brooke and Hancock were not part
of the open service area formerly assigned to MSOPA for which HCFA
solicited applications from OPOs. Findings 9, 10, 12, 14.

41. CORE knew no later than early January 1992, that Brooke and
Hancock counties were not part of MSOPA's service area. Findings
10, 11, 12, 13.

42. HCFA's initial determination to reallocate the designated
service area formerly allocated to MSOPA did not include the West
Virginia counties of Brooke and Hancock. HCFA Ex. 13, 28.

43. CORE was not entitled to reconsideration as to the assignment
of the West Virginia counties of Brooke and Hancock to an OPO other
than CORE because those counties were not part of the open service
area formerly assigned to MSOPA and were not involved in HCFA's
initial determination. Findings 41, 42.

44. CORE is not entitled to a hearing as to HCFA's allocation of
the West Virginia counties of Brooke and Hancock to an OPO other
than CORE, because CORE did not timely request reconsideration of
this allocation. Findings 10 - 14; 42 C.F.R. 498.22(b)(3).

45. In reconsidering its initial determination, HCFA was required
to consider any written evidence submitted by CORE which related to
CORE's activities in the service area previously assigned to MSOPA
subsequent to the date of the initial determination. 42 C.F.R.
498.24(b).

46. In reconsidering its initial determination, HCFA did not
consider written evidence submitted by CORE which related to CORE's
activities in the service area previously assigned to MSOPA
subsequent to the date of the initial determination. HCFA Ex. 37;
ALJ Exs. 1, 2.

47. HCFA failed to conduct a redetermination of the assignment of
the nine West Virginia counties sought by CORE, which HCFA had
assigned to VOPA, in accordance with the requirements contained in
42 C.F.R. 498.24(b).

48. The appropriate remedy in this case is to remand it to HCFA to
conduct a reconsideration in accordance with the requirements of 42
C.F.R. 498.24(b).

RATIONALE

This is a case of first impression involving the application of
section 1138(b) of the Social Security Act and the implementing
regulations contained in 42 C.F.R. Part 485. The case involves
also interpretation and application of the regulations contained in
42 C.F.R. Part 498. The law and material facts are as follows.

I. This case is governed by section 1138(b) of the Social
Security Act, and by the regulations at 42 C.F.R. Parts 485 and
498.

Section 1138(b) of the Social Security Act establishes a mechanism
whereby agencies which procure organs for transplant may qualify
for reimbursement under Titles XVIII (Medicare) and XIX (other
federally-funded health care programs, including Medicaid). This
section specifies that, in order to qualify for reimbursement as an
OPO, an organization must either be qualified under section 371(b)
of the Public Health Service Act, or must be certified or
recertified by the Secretary as meeting qualifying standards within
the previous two years. It specifies further that the Secretary
may not select more than one OPO to provide organ procurement
services to each designated service area.

The implementing regulations contained in 42 C.F.R. Part 485 set
forth the qualifications necessary for an agency to be designated
as an OPO. 42 C.F.R. 485.304. They reiterate the statutory
requirement that only one OPO may be selected by the Secretary to
serve a designated service area. 42 C.F.R. 485.308(a). They
provide that, where more than one OPO applies to serve a designated
service area, and where the competing OPOs meet the basic
qualifying requirements contained in 42 C.F.R. 485.304, the
Secretary will select one of the competing OPOs based on
consideration of certain "other factors." These factors are
enumerated in 42 C.F.R. 485.308(a)(1) - (6). The regulations
thus envision that qualified OPOs may compete for the franchise in
a designated service area, and they establish tie-breaker criteria
to be applied in order to resolve competitions for territory among
OPOs.

Section 1138(b) does not provide hearing or appeal rights to
agencies that are dissatisfied with determinations concerning their
applications to be designated as OPOs or for territorial rights to
designated service areas. This section therefore differs from
other sections of the Act which specifically confer hearing and
appeal rights pursuant to section 205(b) of the Act on individuals
and entities who are dissatisfied with determinations made by the
Secretary or her delegate, HCFA. See, e.g., Social Security Act,
section 1866(h)(1) (which provides for a hearing pursuant to
section 205(b) where the Secretary determines that an institution
or an agency is not a provider of services, or where the Secretary
terminates or refuses to review an agreement with a provider), and
Social Security Act, section 1869(b)(1) (which provides for a
hearing pursuant to section 205(b) for an individual who is
dissatisfied with the Secretary's determination as to coverage for
Medicare benefits).

However, the regulations provide that an organization which applies
to HCFA for designation as an OPO for a service area, and which is
not designated by HCFA, may appeal its non-designation under the
regulations contained in 42 C.F.R. Part 498. 42 C.F.R.
485.308(b). CORE's appeal rights in this case thus arise from
regulations, including the regulations contained in 42 C.F.R. Part
498.

Under the Part 498 regulations, a supplier which is dissatisfied
with an initial determination by HCFA may request reconsideration
of that determination. 42 C.F.R. 498.22. The standards by
which reconsiderations are to be conducted are set forth in 42
C.F.R. 498.24. The regulations provide further that a
prospective supplier who is dissatisfied with a reconsidered
determination is entitled to a hearing before an administrative law
judge. 42 C.F.R. 498.5(d)(1).

II. The parties do not disagree as to the factual background
of this case.

Prior to October 1991, the State of West Virginia, with the
exception of the counties of Mineral, Hancock, Brooke, Ohio,
Marshall, Cabell, Wayne, and Wood, comprised a service area which
HCFA had assigned to MSOPA. In September 1991, MSOPA ceased
operating in West Virginia. It entered into an agreement with CORE
under which CORE assumed responsibility for MSOPA's service area in
West Virginia. 10/ On October 18, 1991, CORE advised HCFA of the
agreement. It told HCFA that it wished to apply to be designated
as the OPO for the counties in West Virginia which had been
designated as MSOPA's service area. It described those counties as
including the counties of Brooke and Hancock.

On December 5, 1991, HCFA replied to CORE, advising it that HCFA
had designated it temporarily as the OPO for the MSOPA service
area, effective October 18, 1991. HCFA told CORE that it would
have to consider applications from all OPOs interested in the MSOPA
service area before it could designate a replacement OPO for MSOPA.
Furthermore, it advised CORE that the West Virginia counties of
Brooke and Hancock were not part of MSOPA's service area and that
they had been assigned previously to another OPO, LOOP. HCFA
advised CORE that, therefore, it could not approve even a temporary
designation of CORE as the OPO for Brooke and Hancock counties.

CORE contends that it did not receive the December 5, 1991 letter
from HCFA. However, it did receive a copy of that letter in early
January 1992. HCFA Ex. 14; P. Ex. 4.

On December 20, 1992, HCFA published a notice advertising that
there was an open service area. It described the service area as
including all counties in the State of West Virginia except the
counties of Mineral, Hancock, Brooke, Ohio, Marshall, Cabell,
Wayne, and Wood. It invited interested entities to apply for
designation as the OPO for the service area.

CORE applied to be designated as the OPO for all West Virginia
counties that were served previously by MSOPA. LOOP applied to be
designated as the OPO for the entire open service area. Another
OPO, VOPA, applied for nine counties of the MSOPA service area.
The counties for which VOPA applied were Morgan, Jefferson,
Fayette, Monroe, Mercer, Berkeley, Raleigh, Greenbrier, and
Summers.

On July 21, 1992, HCFA informed CORE, VOPA, and LOOP that it had
decided to award to CORE all of the MSOPA service area except for
the nine counties for which VOPA had applied. HCFA's July 21
letter further informed CORE, VOPA, and LOOP that it had awarded
Morgan, Jefferson, Fayette, Monroe, Mercer, Berkely, Raleigh,
Greenbrier, and Summers to VOPA. HCFA advised the OPOs that it had
based its determination on a consideration of the parties'
applications pursuant to the tie-breaker criteria contained in 42
C.F.R. 485.308.

On October 26, 1992, CORE filed a request for reconsideration with
HCFA. 11/ In its request, CORE asserted that it had planned to
serve the "entire state of West Virginia," based on MSOPA's
cessation of operations. Request for Reconsideration of
Designation of Certain Counties in West Virginia, ALJ Ex. 1 at 2.
CORE asserted that HCFA had failed to acquire from it all relevant
information necessary to evaluate its performance and experience,
when compared against that of LOOP and VOPA, pursuant to the
tie-breaker criteria of 42 C.F.R. 485.308. CORE asserted that
a proper application of the tie-breaker criteria established that
it would do a better job than VOPA in the nine counties HCFA
awarded to VOPA. CORE contended also that had HCFA properly
applied the tie-breaker criteria to the counties it had awarded to
LOOP, HCFA would have determined that CORE's performance was
superior to LOOP's.

CORE's request for reconsideration contained information concerning
its performance, both in West Virginia and elsewhere. CORE sought
to contrast this performance with that of other OPOs, particularly
VOPA. To that end, CORE provided HCFA with information concerning
its performance in 1992 and with information concerning VOPA's
performance during the same time period. Specifically, CORE
provided HCFA with information concerning the total organs
recovered by CORE in the first six months of 1992, compared with
VOPA's performance during the same period of time. ALJ Ex. 1 at 9.

Additionally, CORE provided HCFA with information concerning its
organ recovery performance in the period between July and October,
1992, compared with VOPA's performance during the same time period.
Id. at 10. CORE provided HCFA with a letter attesting to its
efforts in 1992 to increase eye tissue donations. Id. at 10 - 11;
ALJ Ex. 2, Attachment 3. CORE provided HCFA with information
concerning the nature of the relationships it had developed during
1992 with hospitals in West Virginia. ALJ Ex. 1 at 14 - 16; ALJ
Ex. 2, Attachments 6, 7. CORE provided HCFA with information
concerning the total number of beds in West Virginia hospitals with
which it had developed relationships, compared to those with which
VOPA had developed relationships. ALJ Ex. 1 at 16 - 17; ALJ Ex. 2,
Attachments 12, 13. This information is ambiguous in that CORE's
reconsideration request does not state clearly whether the
information includes 1992 information. CORE provided HCFA with
information concerning its efforts to place organ procurement
coordinators in reasonably close proximity to hospitals in West
Virginia. This information included information as to CORE's
efforts in 1992 to establish coordinators in West Virginia.

On August 31, 1993, HCFA advised CORE that it had affirmed its
original determination to award nine counties in West Virginia to
VOPA. In denying the reconsideration request, HCFA made it plain
that it had not considered information supplied by CORE concerning
its performance, or that of other OPOs, after January 31, 1992, the
deadline for the original application for the service area vacated
by MSOPA. HCFA asserted specifically that it would not consider
organ procurement cost information supplied by CORE covering a
period of time after January 31, 1992 "because . . . [the
information] was issued after the evaluation period used to
determine the filling of open service area." HCFA Ex. 37 at 2. 12/

Furthermore, HCFA asserted that CORE's efforts to place organ
procurement coordinators in West Virginia were not relevant because
"we have discerned that not all CORE coordinators were in place at
the time of the initial application; therefore there is no merit to
this concern in the appeal." Id. at 3. HCFA did not discuss the
other information which CORE had supplied to it concerning its
performance in 1992 or that of other OPOs during the same period of
time.

CORE then filed a request for a hearing before an administrative
law judge. In its request, CORE contended that the proper scope of
the hearing should include HCFA's determination to award the nine
counties in West Virginia to VOPA and also HCFA's alleged
determination to award to LOOP an additional five counties
(Marshall, Mineral, Ohio, Brooke, and Hancock).

III. There is no need for an in-person hearing.

In his January 13, 1994 prehearing order, Judge Stratton questioned
whether an in-person hearing was necessary. He established a
schedule whereby the parties could brief issues in dispute,
including the issue of whether an in-person hearing would be
needed. Judge Stratton scheduled a hearing to commence on May 3,
1994, in the event that he decided that such a hearing was needed.
Based on the law, the undisputed material facts, and the parties'
arguments, I concluded that there was no need in this case for an
in-person hearing. I therefore canceled the May 3 hearing.

In deciding whether there is a need for an in-person hearing, I
have considered two questions. First, I have assessed whether
there are material facts pertaining to CORE's request for a hearing
to contest HCFA's decision to award Brooke and Hancock counties to
VOPA, which are not set forth completely in the parties' exhibits
and which must be explicated by testimony. Second, I have assessed
whether there exist material facts pertaining to HCFA's
reconsideration of CORE's application for the former MSOPA service
area which are not set forth completely in the parties' exhibits
and which could be explicated by testimony. I conclude that there
are no material facts at issue which are not set forth completely
in the part of the parties' exhibits that I admit into evidence.
Therefore, there is no need here for me to conduct an in-person
hearing.

As I shall discuss in detail in Part VI of the Rationale, I find
that CORE is not entitled to a hearing as to HCFA's determination
to award Brooke and Hancock counties to LOOP. I base this
conclusion on HCFA Exs. 1, 11, 12, 13, and 14, and P. Exs. 2 and 4.
Neither CORE nor HCFA has asserted that there exist material facts
in other exhibits which are relevant to the issue of CORE's
entitlement to a hearing as to Brooke and Hancock counties, and
neither CORE nor HCFA has asserted that there is a need for
testimony to elucidate any facts pertaining to the issue of CORE's
entitlement to a hearing on this issue. I conclude that the
exhibits I have cited here and relied on describe completely the
facts which are relevant to resolving the issue of CORE's
entitlement to a hearing as to Brooke and Hancock counties. In
reaching that conclusion, I have reviewed also all of the other
exhibits submitted by the parties and I find nothing in them that
would affect or alter my conclusion.

CORE objected to HCFA Exs. 1 and 12 on the ground that these two
exhibits contain unidentified, extraneous handwritten statements.
I have resolved CORE's objections by not considering the
handwritten statements in any respect in reaching my decision in
this case. CORE objected also to HCFA Ex. 12 on the grounds that
it is not signed, and that there is no proof that the exhibit (a
letter dated December 5, 1991 from HCFA to CORE) was actually
mailed to or received by CORE. However, in a letter from CORE to
HCFA dated January 2, 1992 (HCFA Ex. 14) CORE admits that it
received from HCFA a letter dated December 5, 1991 (the date on
HCFA Ex. 12). Furthermore, contained in CORE's exhibits as P. Ex.
4 is a letter from CORE's files which is a duplicate of HCFA Ex.
12. In my judgment, the record establishes that CORE received a
copy of HCFA's December 5, 1991 letter (HCFA Ex. 12) on or before
January 2, 1992.

As I discuss in Part VII of this Rationale, HCFA failed to follow
the regulatory requirements contained in 42 C.F.R. 498.24 when
it did not reconsider CORE's application for the service area
vacated by MSOPA. I base my conclusion in that Part on my reading
of the relevant regulations and on the facts as set forth in three
documents: CORE's October 26, 1992 request for reconsideration (ALJ
Ex. 1); the appendix to that request, consisting of 12 attachments,
which CORE also submitted to HCFA (ALJ Ex. 2); and HCFA's August
31, 1993 reconsideration determination (HCFA Ex. 37). Neither
party has objected to my consideration of these documents, and
neither party has contended that there is a need for testimony to
resolve the issue of whether HCFA conducted its reconsideration of
CORE's application in accordance with the requirements of 42 C.F.R.
498.24.

CORE has argued strenuously that there is a need for me to conduct
an in-person hearing in this case with the admission of live
testimony. However, none of the testimony which CORE seeks to
present relates to the issues which I resolve in Parts VI and VII
of this decision. CORE asserts that it is entitled to an in-person
de novo hearing to address the issue of whether it is the OPO that
is best qualified to represent the entire service area vacated by
MSOPA. CORE contends additionally, that my decision, based on the
evidence of record, should supplant the initial and reconsideration
determinations made by HCFA. For the reasons which I discuss
below, I do not agree with CORE's arguments. 13/

Also, as I discuss in Part VII of the Rationale, I find that HCFA
has not conducted a reconsideration, in accordance with the
requirements of 42 C.F.R. 498.24(b), of CORE's application for
the nine West Virginia Counties that HCFA awarded to VOPA. This
failure by HCFA constitutes a fundamental defect in the review
process. I conclude that, inasmuch as the reconsideration
determination is defective on its face, there exists no basis for
me to consider the underlying merits of the parties' positions. I
cannot review HCFA's determinations for propriety because HCFA has
never completed the determinations it is obligated to perform.

IV. CORE is not entitled to an in-person de novo hearing in
this case.

CORE argues that it is entitled to an in-person de novo hearing as
to whether it is the OPO best qualified to provide services in the
counties at issue. CORE contends that I must give no weight to
HCFA's determination. In effect, CORE argues that the initial
determination process and reconsideration are merely procedural
hurdles it must clear on the way to a full evidentiary hearing
before an administrative law judge, involving a de novo standard of
review. That standard, according to CORE, comprises two elements.
The first element is a de novo hearing, in which CORE would be
permitted to offer all evidence that is relevant to its
qualifications to serve the counties at issue, even if that
evidence is generated at a point in time after HCFA's initial and
reconsideration determinations. The second element is that CORE's
qualifications should be evaluated by an administrative law judge
without regard to the evaluation performed by HCFA. In other
words, the evidence should be measured against only the tie-breaker
criteria contained in 42 C.F.R. 485.308(a)(1) - (6).
In order to assure that the record is complete and that all
affected parties be afforded due process, other affected OPOs (in
this case, VOPA) should be joined as parties and afforded the same
opportunities to present evidence as are afforded to CORE.

It is not necessary for me to decide here precisely what the
standard of review is in administrative appeals from
reconsideration determinations made pursuant to the Part 485 and
498 regulations. I do not need to reach that issue because I find
that it would be premature in this case for me to consider the
merits of HCFA's determinations, because HCFA's determinations are
fundamentally flawed. However, I do not agree with CORE's
formulation of the standard of review.

I conclude that the Secretary intended that review by
administrative law judges of determinations made by HCFA pursuant
to the Part 485 and 498 regulations be in some respects limited to
a review of the propriety of HCFA's determinations, based on the
record created before HCFA. In this case, HCFA failed to create
the record which was required by the regulations. For that reason,
I do not have a complete record to review and I must find HCFA's
reconsideration determination to be defective. But that does not
suggest that the Secretary intended that I supplant the initial
determination and reconsideration process with a de novo hearing.

CORE asserts that the regulations contained in Part 498 contemplate
de novo hearings, citing 42 C.F.R. 498.60(b)(1). That section
provides that, in a hearing, an administrative law judge inquires:

fully into all of the matters at issue, and receives in
evidence the testimony of witnesses and any documents that are
relevant and material.

CORE asserts that this language expresses the Secretary's intent to
provide de novo hearings in all cases heard by administrative law
judges pursuant to the Part 498 regulations. CORE cites 42 C.F.R.
498.56 as additional support for its contention that the
proceedings in this case should be de novo. The regulations at 42
C.F.R. 498.56 provide that administrative law judges may grant
hearings on new issues which impinge on the rights of affected
parties.

I disagree with CORE's analysis. My reading of the Part 498
regulations is that they do not necessarily provide for hearings in
which the standard of review is de novo. Rather, they provide for
such hearings as may be appropriate, given the kind of case heard
pursuant to those regulations. Neither the Act nor the Part 485
regulations provide for de novo hearings in cases involving HCFA's
determinations to allocate service areas to OPOs. To the contrary,
the implication of the Part 485 regulations is that appeals of
HCFA's determinations pursuant to Parts 485 and 498 be evaluated
using a standard of review which constitutes something less than a
de novo review.

The language contained in 42 C.F.R. 498.60(b)(1), on which CORE
relies to support its assertion that it is entitled to a de novo
hearing, requires administrative law judges to inquire fully into
the matters that are at issue in particular cases. But it does not
define what is meant by the term "matters that are at issue." It
requires also that administrative law judges receive into evidence
that which is relevant and material to a particular case. But it
does not define what is meant by the term "relevant and material."

I read this language as constituting a directive to administrative
law judges to conduct full hearings in cases brought pursuant to
Part 498, consistent with whatever standard of review is applicable
in such cases. But this language is neutral in terms of describing
what may be a matter at issue or what may be relevant or material
in a particular case. What is at issue in any case and what is
relevant and material in deciding that issue depends on the nature
of that case.

Furthermore, I do not find support for CORE's contention that I
must afford it a hearing with a de novo review standard because of
the language contained in 42 C.F.R. 498.56. That regulation
provides that, in a hearing conducted pursuant to the Part 498
regulations, an administrative law judge may, where appropriate,
consider new issues that impinge on the rights of the affected
party. It does not define the term "new issues." I read this
language also as not embodying a standard of review. Rather, as
with the language contained in 42 C.F.R. 498.60(b)(1), it is
neutral language which empowers an administrative law judge to
consider a new issue where appropriate, without defining what a
"new issue" constitutes. What is a "new issue" in any case depends
on the standard of review employed to hear and decide that case.

The Part 498 regulations thus do not establish a standard of review
for this case. They are generic hearing and appeals regulations
which apply to a variety of cases. The standard of review to be
employed in any case heard and decided pursuant to the Part 498
regulations depends on what either Congress or the Secretary has
directed that standard of review to be. That standard will be
found either in the Act itself or in implementing regulations other
than the Part 498 regulations.

The Part 498 regulations may be used to hear and decide cases where
the standard of review is a de novo hearing. As I describe above,
the Secretary has directed that they be used to hear and decide,
among other things, cases brought pursuant to sections 1866(h)(1)
and 1866(b)(1) of the Act. At one time, these regulations were
used to hear and decide cases brought pursuant to sections 1128 and
1156 of the Act. All of these types of cases are cases in which
the parties are entitled to de novo hearings. However, the reason
that the parties to such cases receive de novo reviews by
administrative law judges is that, in such cases, the parties have
statutory rights to de novo hearings pursuant to section 205(b) of
the Act. That section has been interpreted consistently to require
that administrative hearings conducted pursuant to it constitute de
novo reviews. Bernardo G. Bilang, M.D., DAB 1295 (1992); Eric
Kranz, M.D., DAB 1286 (1991). 14/

This case is different from those in which parties have hearing
rights pursuant to section 205(b) of the Act. In this case, CORE
has no statutory right to a hearing. Section 1138(b) does not
confer hearing rights on dissatisfied parties, either directly or
by implication. CORE's hearing rights emanate solely from the
Secretary's decision, in her discretion, to confer hearing rights
on OPOs who are dissatisfied with HCFA's determinations.

Thus, in order for me to decide whether the standard of review in
this case is a de novo review, I must look to what the Secretary
has directed me to apply. Section 205(b) of the Act does not
provide guidance here. The Secretary has neither stated nor
implied that parties in cases involving determinations made
pursuant to section 1138(b) of the Act should be given hearings
using the standards of review contained in section 205(b). Nor do
the Part 498 regulations provide guidance as to the standard of
review that I should employ, because, as I find above, these
regulations are generic hearing regulations which do not establish
review standards. I conclude that the source that I must look to
for the standard of review in this case is the Part 485
regulations, which establish the criteria for HCFA to allocate
designated service areas to OPOs, and which spell out the appeal
rights for agencies dissatisfied with HCFA's determinations.

The regulations in Part 485 do not describe specifically a standard
of review in administrative hearings involving determinations made
pursuant to Part 485. The section which establishes the right to
a hearing, 42 C.F.R. 485.308(b), states only that:

An organization that applies to HCFA to be the designated OPO
for its service area and that is not designated may appeal its
non-designation under part 498 of this chapter.

This section is essentially silent as to the scope of review which
the Secretary intends to govern hearings before administrative law
judges concerning determinations made pursuant to section 1138(b).

However, the review process described in the Part 485 regulations,
when coupled with the reconsideration process described in the Part
498 regulations, suggests that the Secretary intended that hearings
before administrative law judges in cases under section 1138(b) of
the Act be limited to a review of the record generated by HCFA at
the initial determination and on reconsideration (assuming that
HCFA allows the parties to provide it with evidence in accord with
the requirements of regulations). That falls short of the kind of
de novo hearing which is advocated by CORE. 15/

It is helpful to consider the purpose of the Part 485 regulations.
They were adopted by the Secretary to implement a statute which
enfranchises OPOs to serve designated territories. Congress'
intent in enacting section 1138(b) of the Act, and the Secretary's
intent in publishing implementing regulations, was to assure that
beneficiaries and recipients who were in need of transplanted
organs had maximum opportunity to receive such organs in the most
efficient way possible. Congress decided that the way to achieve
this objective was by designating specific territories to be
allocated to OPOs and by directing that no more than one OPO be
allocated a given territory.

One purpose of the Part 485 regulations was to establish a
mechanism by which HCFA could decide which OPO was best qualified
to provide transplant services to a designated service area. The
regulations plainly envision competition among OPOs for service
areas. They establish a complex and detailed set of criteria by
which HCFA decides such competitions. 42 C.F.R. 485.308(a)(1)
- (6).

It is evident that OPOs who are allocated designated service areas
by HCFA rely on such designations. VOPA has not awaited the
outcome of this case to become active in the nine counties formerly
allocated to MSOPA which HCFA allocated to it in July 1992. CORE
has likewise devoted considerable energy and efforts to its
designated service area. Relationships with hospitals have been
established and organ donor networks have been created.

CORE's argument, essentially, is that the Secretary intends that I
should ignore these realities now that the case is before me. It
would have me begin the review process anew and receive evidence
from all affected parties, including those OPOs who are satisfied
with HCFA's determination and who did not request a hearing.

I do not read the Part 485 regulations as suggesting that CORE is
entitled to a hearing which renders meaningless the determinations
that HCFA is required to make under those same regulations.
Additionally, I do not construe the Part 485 regulations as
creating a process for CORE to contest HCFA's determinations and
simultaneously contend that those same determinations are not
entitled to at least some degree of deference.

Given that the regulations direct HCFA to conduct a review process
that is both complex and wide-ranging in scope, and the likelihood
that OPOs will rely on the results of that process even while
appeals are pending, it makes little sense to conclude that the
Secretary would, in effect, say that HCFA's determination was
entitled to absolutely no deference once a case reached the level
of the administrative law judge. Such a result would effectively
render meaningless the HCFA review process and would suggest that
parties rely on that process at their peril. It would encourage
OPOs to hold back evidence from the HCFA review process if they
thought they could get a more favorable hearing at the level of the
administrative law judge. Such a result might deter an OPO who
prevailed in a competition for a service area to refrain from
commencing operations in that area pending the outcome of the
administrative hearing process. That in turn would frustrate the
objectives of section 1138(b) of the Act, which include
facilitating the procurement of organs for transplant for program
beneficiaries and recipients. Ultimately, delays in implementing
OPO activities in a service area resulting from the time delays
inherent in the hearing process might affect adversely the welfare
of beneficiaries and recipients.

For these reasons, I conclude that in an administrative hearing
involving an OPO dissatisfied with a determination made pursuant to
the Part 485 regulations, the evidence to be considered is limited
to that which was provided to HCFA, in connection with the initial
determination and the request for reconsideration. It would render
meaningless the process of review which is established by the
regulations if I were to accept evidence at the hearing that a
party had the opportunity to present to HCFA, but which it did not
present. Furthermore, the regulations plainly envision that the
evidentiary record closes with the reconsideration decision.

My analysis here makes it all the more evident that HCFA must, in
conducting its reconsideration review, allow a party full
opportunity to present evidence to it consistent with the
requirements of the regulations. As I discuss below, HCFA's
failure to comply with the regulations in accepting and considering
evidence renders its reconsideration determination defective on its
face.

V. CORE withdrew its hearing request concerning Marshall,
Mineral, and Ohio counties.

CORE concedes that the West Virginia counties of Ohio, Marshall,
and Mineral should not be part of its appeal. Petitioner's
Memorandum in Opposition to Respondent's Motion for Summary
Disposition, at 3 - 4, n. 2. The regulations in 42 C.F.R. Part 498
provide that an administrative law judge may dismiss a request for
a hearing if a party withdraws its request for a hearing or the
affected party asks that the request be dismissed. 42 C.F.R.
498.68(a). That regulation provides further that an affected party
may request a dismissal by filing a written notice with the
administrative law judge. 42 C.F.R. 498.68(b). I construe
CORE's concession as a written request to withdraw its request for
a hearing as to the West Virginia counties of Ohio, Marshall, and
Mineral. I dismiss the request for a hearing concerning these
counties, pursuant to 42 C.F.R. 498.68(a) and (b).

VI. CORE is not entitled to a hearing to contest HCFA's
determination regarding Brooke and Hancock counties.

CORE contends that its hearing request properly includes the issue
of whether HCFA should have awarded Brooke and Hancock counties to
CORE. HCFA contends that CORE is not entitled to a hearing as to
these two counties.

42 C.F.R. 498.70(b) provides that an administrative law judge
may dismiss a hearing request where a party has no right to a
hearing. I conclude that CORE has no right to a hearing as to
whether HCFA should have awarded Brooke and Hancock counties to
CORE. I therefore dismiss that part of CORE's hearing request
pertaining to Brooke and Hancock counties, pursuant to 42 C.F.R.
498.70(b).

CORE's contention that it is entitled to a hearing as to HCFA's
determinations concerning Brooke and Hancock counties raises two
questions. The first question is whether Brooke and Hancock
counties were formerly designated as part of MSOPA's service area.
As to this question, I conclude that Brooke and Hancock counties
were not part of the area for which HCFA solicited applications in
December 1991. I conclude also that CORE did not apply for these
counties in its final application for that area.
CORE is not entitled to a hearing as to HCFA's alleged failure to
award it Brooke and Hancock counties as part of HCFA's
determination concerning the former MSOPA service area, because
Brooke and Hancock counties were not a subject of the
determination. HCFA made it plain to interested OPOs in December
1991 that it was considering applications only for the service area
vacated by MSOPA, which did not include Brooke and Hancock
counties. In its initial determination, HCFA allocated only
MSOPA's former service area, which did not include Brooke and
Hancock counties.

Under the Part 498 regulations, a prospective supplier's
entitlement to a hearing derives from the initial and reconsidered
determinations made by HCFA. 42 C.F.R. 498.5(d)(1). A
prospective supplier is not entitled to a hearing as to matters
which are not the subject of the initial or reconsidered
determination.

In this case, the subject of HCFA's initial and reconsidered
determinations was the West Virginia service area assigned
previously to MSOPA. The service area assigned to MSOPA in West
Virginia did not include Brooke and Hancock counties. HCFA had
assigned those two counties previously to LOOP, when it awarded
LOOP a territory which included the Steubenville-Weirton Ohio-West
Virginia Metropolitan Statistical Area (MSA). P. Ex. 2. 16/ That
MSA included Brooke and Hancock counties. HCFA Ex. 1.

HCFA made it plain in its December 20, 1991 announcement of the
open service area in West Virginia that the service area for which
it was soliciting applications comprised:

all counties in West Virginia except Mineral, Hancock, Brooke,
Ohio, Marshall, Cabell, Wayne and Wood.

HCFA Ex. 13 at 2 (emphasis added). CORE has not asserted that it
was unaware of this announcement.

Because HCFA had allocated Brooke and Hancock counties to LOOP
previously, they were not available for assignment as of January
31, 1992. HCFA did not consider that Brook and Hancock were part
of the former MSOPA service area. Accordingly, HCFA did not
consider Brooke and Hancock counties in its determination to
allocate the former MSOPA service area. Brooke and Hancock
counties were simply not counties that were the subject of that
determination. Therefore, HCFA's determination and reconsidered
determination as to the MSOPA service area does not give CORE the
right to a hearing as to HCFA's failure to allocate Brooke and
Hancock counties to CORE.

On October 18, 1991, CORE wrote to HCFA to tell it of its agreement
with MSOPA to assume the service area which MSOPA had vacated. In
that letter, CORE told HCFA that it would like to "apply for"
counties in West Virginia served previously by MSOPA. The counties
which CORE averred were included in the MSOPA service area included
Brooke and Hancock counties. HCFA Ex. 11 at 2. If the October 18,
1991 letter were the only letter which CORE sent to HCFA concerning
its intent to apply for the former MSOPA service area, then it
could be construed as an application for all of West Virginia and
not just for those counties vacated by MSOPA.

But even if the October 18 application had been CORE's only
communication with HCFA concerning its desire to be designated as
a replacement for MSOPA in the service area formerly assigned to
MSOPA, CORE would not be entitled to a hearing as to Brooke and
Hancock counties. CORE is not entitled to a hearing merely because
it applied to serve Brook and Hancock counties. In order to be
considered to be the OPO to serve Brook and Hancock counties, those
counties must have been part of the area vacated by MSOPA. The
fact that CORE may have applied initially to be designated by HCFA
to be the OPO in Brooke and Hancock counties under the mistaken
notion that these two counties were part of the service area
vacated by MSOPA does not give CORE a right to a hearing.

The record reflects unequivocally that the former MSOPA service
area for which HCFA sought applications did not include Brooke and
Hancock counties and that HCFA's initial determination did not
allocate Brooke and Hancock counties. The fact is, however, that
shortly after October 18, 1991, CORE learned that the former MSOPA
service area did not include Brooke and Hancock counties and
learned also that HCFA was not considering Brooke and Hancock
counties as part of its determination to reallocate the MSOPA
service area. CORE changed its application for the service area to
reflect that knowledge. In January 1992, CORE explicitly changed
its application for the service area vacated by MSOPA to include
only those counties in West Virginia that had been vacated by
MSOPA.

On December 5, 1991, HCFA responded to CORE's October 18, 1991
letter. It told CORE that the MSOPA service area did not include
Brooke and Hancock counties. HCFA Ex. 12. On January 2, 1992,
CORE responded to the December 5, 1991 letter from HCFA by stating
that it:

would like to change its application for the state of West
Virginia. We would now like to apply for all counties currently
not served by any other OPO. In essence we would like to apply for
all counties previously served by . . . [MSOPA] . . . .

HCFA Ex. 14; P. Ex. 4. Thus, not only did HCFA's determinations
concerning the former MSOPA service area not include Brooke and
Hancock counties, but CORE changed its application for the MSOPA
service area to exclude Brooke and Hancock counties after being
advised by HCFA that these counties were not part of the service
area. The subject matter of the determination thus did not include
Brooke and Hancock counties.

The second question is whether HCFA failed to notify CORE of a
previous determination, in which it allocated Brooke and Hancock
counties to LOOP, so that CORE was deprived of the opportunity to
timely file a reconsideration request from this determination. I
conclude that, on December 11, 1991, HCFA notified CORE of that
previous determination. Furthermore, to the extent that the
December 11, 1991 notice to CORE is arguably ambiguous, HCFA
clarified that notice in its response to CORE's October 18, 1991
letter, which CORE received in early January, 1992. HCFA Ex. 14;
P. Ex. 4. CORE did not request reconsideration timely, either from
the December 11 notice, or from the other notice which CORE
received in January, 1992. Therefore, CORE is not entitled to a
hearing as to HCFA's determination to allocate to LOOP a service
area which included Brooke and Hancock counties.

CORE asserts that it was unaware prior to July 21, 1992, when HCFA
issued its initial determination to allocate the service area
formerly allocated to MSOPA, that HCFA had assigned Brooke and
Hancock counties to LOOP previously. CORE asserts that, because it
was unaware that these counties had been allocated to LOOP, it was
denied an opportunity to appeal that assignment. Therefore,
according to CORE, the time period during which it could request
reconsideration, either of HCFA's failure to allocate Brooke and
Hancock counties as part of the MSOPA service area, or of HCFA's
previous assignment of Brooke and Hancock counties to LOOP, should
begin on July 21, 1992. The time period during which it could
request a hearing as to those counties should begin to run with the
date of the denial of the reconsideration request. Petitioner
contends, therefore, that its request for reconsideration and a
hearing as to the assignment of Brooke and Hancock counties is
timely, given its first knowledge of that assignment. See P. Opp.
at 3.

This argument is not persuasive. CORE cites no evidence to support
its assertion that it was unaware prior to July 21, 1992 that HCFA
considered Brooke and Hancock counties to be outside of the open
service area. CORE's assertion is contradicted squarely by the
December 5, 1991 and January 2, 1992 correspondence between CORE
and HCFA which proves that, not only did CORE know that Brooke and
Hancock counties were not part of the service area vacated by
MSOPA, but that it changed its application for the service area to
reflect that knowledge. HCFA Ex. 12, 14; P. Ex. 4. Furthermore,
HCFA had advised CORE in another communication that it had
determined to assign to LOOP a service area which included Brooke
and Hancock counties. P. Ex. 2. CORE did not request
reconsideration from this determination.

On December 11, 1991, HCFA advised CORE that the service area which
included Brooke and Hancock counties had been assigned to LOOP. P.
Ex. 2. The service area had been advertised previously by HCFA as
an open service area. In its correspondence with CORE, HCFA
described that service area as comprising the Steubenville-Weirton
Ohio-West Virginia MSA. CORE, LOOP, and MSOPA applied to be the
designated OPO for that service area.

HCFA's December 11 letter does not state specifically that Brooke
and Hancock counties are part of the Steubenville-Weirton Ohio-West
Virginia MSA. However, the Census Bureau publication describing
MSAs states that this MSA includes Brooke and Hancock counties.
HCFA Ex. 1 at 7. 17/ CORE had applied to serve this MSA. CORE
could not possibly have made a credible application to serve the
MSA without knowing that it comprised Brooke and Hancock counties.
Therefore, CORE was on notice as of its receipt of HCFA's December
11, 1991 letter that HCFA had allocated Brooke and Hancock counties
to LOOP.

Furthermore, even were I to assume that the December 11, 1991
notice is ambiguous, CORE was on notice no later than early January
1992, that HCFA would not accept applications for Brooke and
Hancock counties, because they had been assigned previously to LOOP
and were not part of the service area vacated by MSOPA. In its
December 5, 1991 letter to CORE, HCFA informed CORE that Brooke and
Hancock counties had been assigned previously to LOOP. Assuming
for the sake of argument that CORE did not learn of the assignment
of Brooke and Hancock counties to LOOP until January 1992, CORE
made no effort to request reconsideration from that later notice
within the 60 days required by the regulations. See 42 C.F.R.
498.22(b)(3). Therefore, its October 26, 1992 request for
reconsideration was untimely as to Brooke and Hancock counties.

From the foregoing, I conclude that: (1) CORE had no right to
request reconsideration as to Brooke and Hancock counties from
HCFA's determination to reallocate the MSOPA service area, because
that service area did not include Brooke and Hancock counties; (2)
CORE knew by no later than early January 1992 that HCFA had
determined separately to assign Brooke and Hancock counties to
LOOP; and (3) CORE did not request reconsideration timely from this
determination.

VII. HCFA failed to follow the regulations governing
reconsideration with regard to CORE's request for the nine West
Virginia counties that HCFA assigned to VOPA.

In reconsidering its determination to allocate the MSOPA service
area, HCFA did not consider facts supplied to it by CORE concerning
its activities and the activities of other West Virginia OPOs after
January 31, 1992. This is inconsistent with the criteria for
evaluating reconsideration requests established by 42 C.F.R.
498.24(b). HCFA's reconsideration determination in this case is,
therefore, defective.

In reconsidering an initial determination, HCFA is required to
receive from a party relevant written evidence and statements which
the party submits within a reasonable time after making the request
for reconsideration. 42 C.F.R. 498.24(a). HCFA is required to
consider as relevant:

the initial determination, the findings on which the initial
determination was based, the evidence considered in making the
initial determination, and any other evidence submitted under
paragraph (a) of this section, taking into account facts relating
to the status of the prospective provider or supplier subsequent to
the initial determination.

42 C.F.R. 498.24(b) (emphasis added).

The regulation establishes that reconsideration is a process in
which parties may submit new evidence which is relevant to the
issues under consideration. Also, the regulation states
unambiguously that the evidence which a party submits to HCFA in
its request for reconsideration may relate to activities and events
which transpire after the date of the initial determination. 42
C.F.R. 498.24(a) and (b).

Here, the relevant issues in the reconsideration consisted of the
comparative strengths and performance of the OPOs who were
competing for the service area formerly assigned to MSOPA, as
measured by the tie breaker criteria contained in 42 C.F.R.
485.308(a)(1) - (6). The Part 498 regulations afforded CORE the
opportunity to present HCFA with evidence concerning its
performance in West Virginia after the date of the initial
determination, as well as evidence concerning the performance of
other OPOs in West Virginia after the date of the initial
determination. 42 C.F.R. 498.24. HCFA was obligated to
consider that evidence in conducting reconsideration.

CORE supplied such additional information to HCFA. The
reconsideration request which CORE filed on October 26, 1992
contained facts pertaining to CORE's performance in West Virginia
after January 31, 1992. Finding 28; ALJ Exs. 1 and 2; Decision at
11 - 14. It contained comparisons between CORE's performance and
VOPA's performance in West Virginia after January 31, 1992. Id.
However, HCFA did not consider this information in evaluating
CORE's request for reconsideration. It refused to consider
comparative cost information developed by CORE for the period after
January 31, 1992 (although it rejected this information also as not
being germane to the issue of comparative costs). HCFA Ex. 37 at
2. In refusing to consider this information, HCFA advised CORE
that it did not consider information to be relevant if it pertained
to a time period beginning after the January 31, 1992 deadline for
filing applications for the service area formerly allocated to
MSOPA. It refused to consider information supplied by CORE
concerning its efforts to develop organ coordinator networks in
West Virginia after January 31, 1992. Id. at 3. It failed to
consider other information supplied by CORE in its reconsideration
request concerning the period after January 31, 1992.

HCFA's refusal to consider information pertaining to the period
after January 31, 1992 constitutes a failure to conduct a
reconsideration in accordance with the criteria contained in 42
C.F.R. 498.24(b). HCFA's reconsideration is therefore defective
on its face and invalid.

HCFA argues that it was not required to consider the additional
information supplied by CORE. It does not dispute that 42 C.F.R.
498.24(b) requires that HCFA consider relevant information which
relates to events which occur after the initial determination.
However, HCFA contends that the Secretary did not intend that this
regulation apply in cases where the tie-breaker criteria of 42
C.F.R. 485.308 are used to determine the relative merits of
competing applications from more than one OPO for a service area.

HCFA bases this contention on two arguments. First, it asserts
that the Part 498 regulations were adopted by the Secretary in 1987
and the Part 485 regulations were adopted in 1988. From this, it
argues that the provisions of the Part 485 regulations supersede
the part 498 regulations. Second, HCFA argues that it would not
make sense to require it to consider additional information here,
where there was more than one OPO competing for a service area.
HCFA asserts that, inasmuch as its initial determination involved
resolving competing bids from three OPOs, it could not consider the
additional information submitted by CORE with its reconsideration
request without, in effect, reopening the entire application
process to all three OPOs. HCFA contends that the Secretary did
not contemplate "such a burdensome and inefficient reconsideration
procedure" applying to reconsideration of competing bids among
OPOs. HCFA MSD at 11.

I am not persuaded by HCFA's arguments. First, the Part 485
regulations specifically incorporate the appeals process contained
in the Part 498 regulations, without qualifications or exceptions.
42 C.F.R. 485.308(b). Thus, rather than supersede the Part 498
regulations with the Part 485 regulations, the Secretary chose
explicitly to require that appeals from determinations made
pursuant to Part 485 be conducted pursuant to Part 498. The
reconsideration procedures contained at 42 C.F.R. 498.24 were
incorporated without exception or qualification.

Second, there is nothing in either the Part 485 regulations or the
Part 498 regulations to suggest that the Secretary concluded that
it would not make sense to utilize the reconsideration criteria of
42 C.F.R. 498.24 in reconsidering applications from OPOs. I
recognize that, in order to conduct a full reconsideration under 42
C.F.R. 498.24, HCFA might have to reconsider the strengths and
assets of competing OPOs under the tie-breaker criteria contained
in 42 C.F.R. 485.308(b). In the appropriate case -- that is,
where an OPO that is dissatisfied with an initial determination
brings new information relevant to the tie-breaker criteria to
HCFA's attention -- HCFA might solicit additional information from
other OPOs who did not seek reconsideration, in order to reconsider
fully the issues raised. But that is exactly what is contemplated
by the language contained in 42 C.F.R. 498.24.

As is apparent from the language of 42 C.F.R. 498.24, the
reconsideration process is not an appellate review by HCFA of its
initial determination, or even a revisiting of that determination
to assure that it was made correctly. The regulation contemplates
a new determination in which additional relevant evidence is
submitted by the party and considered by HCFA. Thus, it may be
that in conducting reconsideration, HCFA must afford all parties to
the initial determination the opportunity to present new evidence
as to issues raised by the party requesting reconsideration. HCFA
may be required to reevaluate its conclusions based on the evidence
it obtains in the reconsideration process.

HCFA's failure to consider the new information submitted to it by
CORE is not just an "error" in its reconsideration. Rather, it
constitutes a fundamental failure by HCFA to evaluate CORE's
application consistent with the requirements of the regulation
governing reconsideration. HCFA's review of CORE's application for
the nine West Virginia counties is therefore defective because HCFA
did not conduct a reconsideration in this case as is contemplated
by 42 C.F.R. 498.24.

VIII. Remand to HCFA is the appropriate remedy.

The question remains what remedy should be employed to address
HCFA's failure to conduct reconsideration in accordance with the
requirements of the regulation. CORE asserts that, even if it is
not entitled to a de novo hearing under the regulations governing
reconsideration, I should order that one be conducted as a remedy
to rectify HCFA's failure to follow the applicable regulations.
CORE contends that I should receive evidence concerning CORE's
current status as an OPO in West Virginia. CORE argues that I
should join VOPA as a party to this proceeding and afford it the
opportunity to present evidence that is relevant concerning its
current status. Then, according to CORE, I should apply the
tie-breaker criteria in 42 C.F.R. 485.308 to the evidence which
CORE, VOPA, and HCFA offer and decide on the basis of the evidence
and those criteria which OPO is better qualified to serve the nine
West Virginia counties which HCFA allocated to VOPA. CORE urges
that I should issue a decision superseding any determination made
by HCFA, allocating the nine counties to the OPO best qualified
under the tie-breaker criteria.

HCFA argues that, in this case, the appropriate remedy would be to
remand the matter for a new reconsideration determination by HCFA.
HCFA contends that any remand order I issue should direct HCFA to
consider evidence concerning CORE and VOPA's relative merits in the
nine counties up to August 31, 1993, the date of HCFA's
reconsideration determination in this case.

Remand to HCFA for a new reconsideration determination is the
appropriate remedy here. However, I disagree with HCFA that August
31, 1993 should be the cut-off date for the receipt of evidence
relevant to CORE's allegedly superior qualifications for the nine
counties. Rather, CORE is entitled to present evidence to HCFA
concerning its status, or the relative strengths and weaknesses of
VOPA, for a reasonable period of time after the date of this
decision. For purposes of establishing a date certain, I construe
that to be 60 days. HCFA may invite VOPA to present relevant
evidence covering this time period as well.

Neither the part 485 regulations nor the Part 498 regulations spell
out the remedies which may be imposed by administrative law judges,
with the exception of remands, in cases involving appeals from
allocations of designated service areas by HCFA. Remand is
specifically recited as a remedy. A case may be remanded for
consideration of a new issue. 42 C.F.R. 498.56(d). A case may
be remanded also where HCFA requests a remand, and "the affected
party concurs in writing or on the record . . . ." 42 C.F.R.
498.78(a).

HCFA contends that this case is appropriate for remand. CORE
asserts that a remand is not appropriate here. In any event, CORE
does not concur, either in writing or on the record, to a remand.
However, I do not read 42 C.F.R. 498.56(d) and 498.78(a) as
describing the only circumstances in which a case may be remanded.
As I note above, the regulations do not set forth the general
authority of administrative law judges to impose remedies.
However, it is apparent from the context of the regulations
relating to remand that administrative law judges' authority to
impose remedies is far broader than just the limited remand
authority described by the regulations. In the absence of a
specific limitation on administrative law judges' authority to
impose remedies, I read the remedial authority of the Part 498
regulations as being as broad as that which is vested in the
Secretary. The remand regulations, in my judgment, are regulations
which state merely that there are specific circumstances
(identification of new issues or where requested by HCFA and
concurred in by the affected party) where remand is authorized
explicitly. However, they do not limit an administrative law
judge's authority to order remands in other cases where such would
be the appropriate remedy.

This conclusion follows logically, both from the regulations'
silence as to the ambit of administrative law judges' remedial
authority, and CORE's arguments concerning administrative law
judges' authority. If, as CORE argues, my authority is so broad as
to include substitution of my evaluation of the record for HCFA's
evaluation, and ordering that HCFA's determination as to the best
qualified OPO be superseded by my own, then it must include the
authority to order less drastic relief.
I conclude that, in this case, remand to HCFA is the reasonable
remedy. It is apparent from both the Part 485 and Part 498
regulations that the Secretary intended that HCFA conduct a
complete review in order to determine which OPO is best qualified
to serve the part of the service area formerly assigned to MSOPA
which is the subject of this case. HCFA has not yet conducted a
complete review because it has not considered information
subsequent to its initial determination, as it is required to do
under the regulations governing reconsideration. Therefore, the
case should be remanded to HCFA so that it may conduct a complete
review pursuant to the regulations governing reconsideration.

I am not suggesting here that I would order a remand to HCFA in
every case where I found that HCFA failed to follow its
regulations. There may be circumstances where the only appropriate
remedy would be something more directive than a remand. Moreover,
I may not be able to order a remedy more directive than a remand
without taking new evidence. But I do not conclude that this case
is one in which a more directive remedy is appropriate. There is
nothing here to show that HCFA is incapable of applying its
regulations or that some other reason exists for me to conclude
that HCFA will not conduct a full reconsideration on remand.

HCFA argues that review should consider relevant evidence
concerning CORE and other OPOs' performance through August 31,
1993, the date of HCFA's remand determination. I disagree with
this contention. HCFA never has conducted the reconsideration
determination which the regulations mandate. The regulations
require HCFA, in considering reconsideration requests, to receive
evidence that is submitted within a "reasonable time after the
request for reconsideration." 42 C.F.R. 498.24(a). Inasmuch as
HCFA has not yet conducted its reconsideration as required by the
regulations, the August 31, 1993 date of HCFA's reconsideration
determination should not be the date that the record closes. I
conclude that CORE may provide HCFA with current data pertaining to
its activities and to the activities of other OPOs as well. In
order to impose some finality on the process, I direct that CORE
should complete its submission to HCFA no later than 60 days from
receipt of this decision. HCFA may invite other parties, including
VOPA, to submit to it any evidence which they consider to be
relevant.

HCFA has suggested that this case may be moot, because it may
decide on its own to reopen the former MSOPA service area for new
applications from agencies wishing to become OPOs for that service
area. I do not conclude that this case is moot, in part because
HCFA has not stated definitively that it is reopening the service
area and because I have no definitive proof before me that such
reopening will occur.

CONCLUSION

I conclude that CORE withdrew its request for a hearing concerning
whether HCFA should have included the West Virginia counties of
Ohio, Marshall, and Mineral within CORE's designated service area.
I conclude that CORE does not have a right to a hearing concerning
whether HCFA should have included the West Virginia counties of
Brooke and Hancock within CORE's designated service area. I
dismiss CORE's request for a hearing concerning Ohio, Marshall,
Mineral, Brooke, and Hancock counties.

I conclude that HCFA did not reconsider its determination to assign
the West Virginia counties of Morgan, Jefferson, Fayette, Monroe,
Mercer, Berkeley, Raleigh, Greenbrier, and Summers to VOPA, and not
to CORE, in accordance with the requirements of 42 C.F.R.
498.24(b). I remand this case to HCFA in order that it may conduct
a reconsideration in accordance with the requirements of 42 C.F.R.
498.24(b). CORE may submit relevant evidence to HCFA up to 60 days
from receipt of this decision. Such evidence may include evidence
which relates to the criteria contained in 42 C.F.R.
485.308(a)(1) - (6) concerning CORE's performance, or the
performance of other OPOs at any time up to the date the evidence
is submitted by CORE to HCFA.

_________________________
Steven T. Kessel
Administrative Law Judge

1. CORE was known originally as Pittsburgh Transplant
Foundation. Some of the correspondence and other documents which
are exhibits in this case were written on Pittsburgh Transplant
Foundation's letterhead, and others were written under CORE's
letterhead. For purposes of simplicity, I refer to Petitioner as
"CORE" throughout this decision.

2. The filing date reflects the date the submission was mailed.

3. I cite the parties' briefs, exhibits, attachments and my
Findings of Fact and Conclusions of Law as follows:

Petitioner's exhibit . . . . . . . P. Ex. (number at page)

HCFA's exhibit . . . . . . . . . HCFA Ex. (number at page)

HCFA's motion . . . . . . . . . . . . . HCFA MSD at (page)

Petitioner's opposition . . . . . . . . . P. Opp. at (page)

HCFA's reply brief . . . . . . . . . HCFA R. Br. at (page)

Petitioner's supplemental brief . . P. Supp. Br. at (page)

HCFA's supplemental brief . . . . HCFA Supp. Br. at (page)

Findings of Fact and Conclusions of Law . . Finding (number)

Administrative Law Judge Exhibit . . . ALJ Ex. (attachment)

4. HCFA submitted 43 exhibits with its motion for summary
disposition. CORE submitted four exhibits and two attachments with
its memorandum in opposition to HCFA's motion for summary
disposition.

CORE objected to HCFA Exs. 1, 4, 6, 7, 8, 12, 16, 18, 20, 22, 31,
and 34, on various grounds. These included objections to allegedly
extraneous handwritten notations on some of the exhibits and to the
authenticity of some of the exhibits. CORE contended also that
HCFA failed to prove that some of these exhibits, consisting of
correspondence, had been mailed by HCFA or had been received by
CORE.

It is not necessary for me to admit all of the exhibits submitted
by the parties in order for me to decide this case. I have
admitted into evidence and rely on HCFA Exs. 1, 8, 11, 12, 13, 14,
16, 18, 28 and 37; P. Exs. 2 and 4; and CORE's October 26, 1992
reconsideration request and the attachments which CORE submitted to
HCFA in conjunction with its request, which I have marked for
identification as ALJ Exs. 1 and 2, respectively. ALJ Ex. 2
consists of 16 attachments. I reject all other exhibits and
attachments submitted by the parties as irrelevant. I have
addressed and resolved all of CORE's objections to the HCFA
exhibits which I have admitted, and I discuss my ruling as to these
exhibits where appropriate.

5. CORE initially contended that it had not received a copy of
HCFA Ex. 12, which is a copy of the December 5, 1991 letter from
HCFA to CORE. At the March 28, 1994 oral argument, counsel for
CORE stated that CORE did receive a copy of the December 5, 1991
letter from HCFA, on January 7 or 8, 1992, after CORE requested
that HCFA send it a copy of the letter. Letter by direction of the
administrative law judge, March 31, 1994. However, as is evident
from HCFA Ex. 14 and P. Ex. 4, CORE actually received a copy of the
letter a few days prior to January 8, 1992.

6. CORE objected to HCFA Ex. 16 on the basis that it contains
extraneous handwritten notations. My findings are not based on the
notations.

7. CORE objected to HCFA Ex. 18 on the ground that it contains
extraneous handwritten notations. My findings are not based on
these notations.

8. CORE objected to pages 3 and 4 of HCFA Ex. 28 as an unsigned
letter not printed on HCFA letterhead. I do not base any of my
findings in this decision on pages 3 and 4 of HCFA Ex. 28.

9. The reconsideration request and the appendix to that request
were not offered as exhibits. In order to ensure that the record
is complete, I have identified the reconsideration request as ALJ
Ex. 1 and admit it into evidence. Cf. Footnote 4. I have
identified the appendix to that request, consisting of 16
attachments, as ALJ Ex. 2 and admit it into evidence. Id.

10. At that time, CORE was known as Pittsburgh Transplant
Foundation. Footnote 1.

11. CORE had requested and received from HCFA an extension of
time within which to file a reconsideration request.

12. Also, HCFA questioned the relevance of this information.

13. Additionally, CORE requested that it be permitted to
conduct discovery, consisting of depositions of HCFA officials, in
order to develop evidence. The Part 498 regulations do not provide
for discovery in cases heard pursuant to Part 498, much less
depositions. I am denying CORE's request to take depositions,
because there is no need in this case for an in-person hearing.
However, even if I were to conclude that there is a need for such
a hearing, I would not grant CORE's request to take depositions.

14. Both Bilang and Kranz involved hearing requests brought
pursuant to section 1128 of the Act. Section 1128 provides that
parties entitled to hearings pursuant to that section have
statutory hearing rights under section 205(b) of the Act. Social
Security Act, section 1128(f).

15. HCFA asserts that, in such a hearing, the administrative
law judge should confine the review to a finding that HCFA's
initial and reconsideration determinations are or are not supported
by substantial evidence. I make no finding here as to whether such
a hearing should be based on a substantial evidence standard of
review, or on some other standard.

16. HCFA offered a version of its December 11, 1991 letter
which it sent to CORE as HCFA Ex. 8. CORE objected to this exhibit
on the ground that it contains some handwritten notations which
appeared to have been added to the document, and on general
authenticity grounds. However, CORE has produced as P. Ex. 2 the
copy of the December 11, 1991 letter which it received. I am
basing my findings concerning the December 11, 1991 letter and
CORE's knowledge of the contents of that letter as it appears in P.
Ex. 2, and not as it appears in HCFA Ex. 8.

17. Regulations which describe service areas for OPOs allude to
MSAs, and not to counties. 42 C.F.R. 485.302.