Renal Services Group of El Centro, DAB CR482 (1997)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

In the Case of: Renal Services Group of El Centro, Petitioner,
- v. -
Health Care Financing Administration.

Date: July 30, 1997

Docket No. C-97-202
Decision No. CR482

DECISION

I decide that the Health Care Financing Administration (HCFA) correctly certified
Petitioner, Renal Services Group of El Centro, to participate in the Medicare program
as a supplier of dialysis services, effective August 19, 1996. I base this decision on
my conclusion that a renal dialysis facility, such as Petitioner, must obtain approval
from HCFA to claim reimbursement for covered services that it provides to Medicare
beneficiaries under the regulations contained in 42 C.F.R. Parts 488 and 489 that
govern certification of providers and approval of suppliers to participate in Medicare.
Under these regulations, the earliest date that HCFA could approve Petitioner to be a
supplier was August 19, 1996.

This case is before me on a request for a hearing by Petitioner from HCFA's
determination to approve Petitioner to supply covered services to Medicare
beneficiaries, effective August 19, 1996. I held a prehearing conference on April 14,
1997, at which the parties agreed that the case could be heard and decided based on
written submissions by the parties. Petitioner submitted a brief and nine proposed
exhibits (P. Ex. 1 - 9). HCFA submitted a brief and seven proposed exhibits (HCFA
Ex. 1 - 7). Neither party has objected to my receiving into evidence any of the
proposed exhibits. I receive into evidence P. Ex. 1 - 9 and HCFA Ex. 1 - 7. I note
that, to some extent, the parties have submitted the same documents as exhibits.
However, neither party will be prejudiced by my receiving into evidence all of the
exhibits, even if, to some extent, they duplicate each other.

The issue in this case is whether HCFA correctly determined to approve Petitioner to
supply covered services to Medicare beneficiaries, effective August 19, 1996. I make
findings of fact and conclusions of law (Findings) to support my decision upholding
HCFA's determination. I set forth each of my Findings below, as a separately
numbered heading. I discuss each Finding in detail.

1. Petitioner is entitled to a hearing concerning whether HCFA
correctly determined to approve Petitioner to be a renal dialysis
facility, effective August 19, 1996.

Petitioner asserts that it is entitled to relief in the amount of $16,275. The claim for
$16,275 is for the services to Medicare beneficiaries that Petitioner alleges to have
provided between July 31, 1996 and August 19, 1996. Petitioner predicates this claim
on its assertion that HCFA ought to have approved it to supply Medicare services
effective July 31, 1996, rather than August 19, 1996. Petitioner's Brief at 3.

HCFA urges that I dismiss Petitioner's request for a hearing on the ground that
Petitioner seeks relief that I have no authority to grant. HCFA argues that Petitioner
is seeking money damages from HCFA and that I have no authority to award damages
to Petitioner.

HCFA asserts correctly that I have no authority to award money damages to
Petitioner. However, HCFA has interpreted Petitioner's request for a hearing too
narrowly. Petitioner has, although not artfully, raised an issue which I have authority
to hear and decide and concerning which Petitioner is entitled to a hearing. For that
reason, I deny HCFA's motion to dismiss Petitioner's hearing request.

I have authority to hear and decide the issue of whether HCFA determined correctly
that Petitioner should be approved to be a renal dialysis facility effective August 19,
1996. 42 C.F.R. § 498.5(d)(2). Petitioner's hearing request raises this issue.
Petitioner's request is predicated on its assertions that HCFA incorrectly approved
Petitioner to be a supplier, effective August 19, 1996, and that HCFA ought to have
approved Petitioner to be a supplier at an earlier date.

2. An applicant for approval from HCFA to be a supplier of
Medicare services must apply for approval, be surveyed, and be
approved, pursuant to the regulations contained in 42 C.F.R. Parts
488 and 489.

Petitioner is a renal dialysis facility. A renal dialysis facility is one of several types of
end-stage renal disease (ESRD) facilities that are described in the Social Security Act
(Act) as facilities which provide services which may be covered under Medicare. Act,
section 1881(b)(1). The Act authorizes the Secretary of the United States
Department of Health and Human Services (Secretary) to publish regulations which
contain substantive criteria that an ESRD facility must satisfy in order to be approved
by HCFA to claim reimbursement for covered services that it provides to Medicare
beneficiaries. Id. These regulations are published at 42 C.F.R. Part 405, Subpart U.

Certain types of entities which provide Medicare items or services are described under
the Act and regulations as providers of services. Act, section 1866; 42 C.F.R. §
488.1. Other types of entities which supply Medicare items or services are defined by
regulations to be suppliers of services. 42 C.F.R. § 488.1. An ESRD facility,
including a renal dialysis facility, is defined to be a supplier of services. Id.

In order to become an approved supplier of Medicare services, an ESRD facility must
be surveyed on-site, so that HCFA may determine whether the ESRD facility is
complying with the requirements contained in 42 C.F.R. Part 405, Subpart U.
Regulations contained at 42 C.F.R. Part 488 establish the process by which entities
who apply to participate in Medicare as providers, or to be approved as suppliers,
satisfy HCFA that they are in compliance with applicable law and regulations. The
regulations describe a process whereby applicants for participation or approval apply
to participate or be approved, and are surveyed on behalf of HCFA to establish that
they meet participation or approval requirements. Id. The application and survey
process applies to both providers of services and suppliers of services, such as ESRD
facilities. See 42 C.F.R. § 488.1.

Regulations contained in 42 C.F.R. Part 489 establish the mechanism by which HCFA
certifies a provider to participate in Medicare based on the results of an initial on-site
survey. 42 C.F.R. § 489.13. Generally, the earliest date that a provider which applies
to participate may be certified by HCFA to participate in Medicare is the date of
completion of an on-site survey of that provider, assuming that the provider satisfies
all Medicare participation requirements as of that date. 42 C.F.R. § 489.13(a).

The regulations which establish the mechanism for provider certification do not, by
their terms, establish a mechanism for approval of a supplier. See 42 C.F.R. Part 489.
The regulations in 42 C.F.R. Part 489 refer only to certification of providers. There
are no regulations which refer to suppliers and describe an approval mechanism which
applies to suppliers and not to providers. The regulations' failure to explicitly
describe the mechanism by which HCFA approves a supplier raises the question of
how HCFA approves a renal dialysis facility such as Petitioner.

I conclude that approval of a renal dialysis facility such as Petitioner is governed by
the same review and approval process in 42 C.F.R. Part 489 that governs the
certification of a provider. A renal dialysis facility may not be approved as a supplier
until after it has been surveyed on site. It must satisfy all substantive requirements
which govern a renal dialysis facility, as a prerequisite to being approved. The earliest
date that a renal dialysis facility may be approved is the date of completion of an initial
on-site survey of the facility, assuming that the facility is found to have satisfied all
Medicare requirements as of that date. 42 C.F.R. § 489.13(a).

I base my conclusion on the following analysis:

Congress intended that the Secretary establish the same process for dealing
with providers and ESRD facilities, including renal dialysis facilities. Congress
specifically directed the Secretary to treat ESRD facilities as "providers" for
purposes of resolving certain reimbursement disputes between ESRD facilities
and fiscal intermediaries or the Secretary. Act, section 1881(b)(2)(D); see
Act, section 1878.

Logically, it would make no sense to subject providers and suppliers to the
same application and initial survey process (Part 488) and not to subject them
to the same approval process (Part 489). Withholding certification of a
provider until completion of an on-site survey of that provider satisfies a need
to assure that the provider is complying with applicable participation
requirements before it begins to treat Medicare beneficiaries on a regular basis
and to seek reimbursement for the treatments that it provides to those
beneficiaries. The identical need exists to assure that a supplier complies with
Medicare requirements.

The regulations at 42 C.F.R. Parts 488 and 489 are part of a coherent
application, survey, and approval process. When the Part 489 regulations are
read in their entirety, and in the context of the Part 488 regulations, it is
apparent that the Part 489 regulations were intended to apply both to
providers and suppliers. The Part 488 regulations explicitly apply to providers
and suppliers. See, e.g., 42 C.F.R. § 488.1. And, although the language of
the regulations in 42 C.F.R. Part 489 refers only to providers of services, the
Part is entitled "Provider agreements and supplier approval."

As further evidence that the Secretary intended that providers and suppliers
be treated in the same way for purposes of certification or approval, the
Secretary gave the same administrative hearing and appeal rights to suppliers
who are dissatisfied with determinations by HCFA concerning their approval
to obtain reimbursement from Medicare for covered services as she gave to
providers who are dissatisfied with determinations by HCFA concerning their
participation in Medicare. 42 C.F.R. § 498.5. This decision by the Secretary
shows that she intended the entire process of application, survey, approval,
and appeal to apply equally to providers and suppliers.

The Secretary's intent to apply the same process to providers and suppliers, from
beginning to end, is made more evident by the fact that the Secretary is under no
specific statutory obligation to give suppliers the same administrative hearing and
appeal rights as are granted to providers. A provider has a statutory right to an
administrative hearing from an adverse determination by HCFA concerning its
participation in Medicare, whereas a supplier does not have that statutory right. Act,
section 1866(h)(1); see Act, section 205(b).

HCFA cites to my decision in SRA, Inc., D/B/A St. Mary Parish Dialysis Center,
DAB CR341 at 3 - 4 (1994), as authority that the Part 489 regulations govern an
ESRD's approval to obtain reimbursement for Medicare services. However, SRA is
distinguishable from this case in one respect. In SRA, HCFA and the petitioner
agreed that the Part 489 regulations would apply to the facts of the case. Here,
Petitioner has not agreed to be governed by the Part 489 regulations, although
Petitioner has not asserted that the regulations are inapplicable. Therefore, although
my decision in SRA is entirely consistent with the decision I reach here, I do not rely
on it to reach my decision in this case.

3. HCFA approved Petitioner to be a supplier of Medicare services,
effective August 19, 1996.

The undisputed facts of this case are that, on July 31, 1996, Petitioner requested the
California Department of Health Services, the California State survey agency, to
survey Petitioner for approval by HCFA as a Medicare supplier. P. Ex. 3. Petitioner
was surveyed on August 19, 1996. HCFA Ex. 1. No deficiencies were identified at
this survey. Id. On October 9, 1996, HCFA advised Petitioner that it had been
approved as a supplier, effective August 20, 1996. HCFA Ex. 3.
Petitioner requested reconsideration of this determination. On December 16, 1996,
HCFA advised Petitioner that, inasmuch as the on-site survey of Petitioner was
conducted on August 19, 1996, HCFA could not approve Petitioner as a supplier at
any date earlier than August 19, 1996. HCFA Ex. 4. Although HCFA did not state
explicitly that it was changing the date of Petitioner's approval from August 20, 1996
to August 19, 1996, I infer from HCFA's December 16, 1996 letter to Petitioner that
it changed the date of Petitioner's approval to August 19, 1996. Id.

4. HCFA approved Petitioner to be a supplier of Medicare services
on the date when Petitioner first became eligible to be approved.

HCFA approved Petitioner to be a supplier of Medicare services, effective August 19,
1996, which is the date when Petitioner first became eligible to be approved. The first
date when a provider may be certified by HCFA or a supplier may be approved by
HCFA is the date of completion of an initial on-site survey of that provider or
supplier, assuming that the provider or supplier satisfies all applicable Medicare
requirements as of that date. 42 C.F.R. § 489.13(a). The date of completion of the
initial on-site survey of Petitioner was August 19, 1996. HCFA Ex. 2. Petitioner
satisfied all applicable Medicare requirements as of that date. Id. HCFA approved
Petitioner as a supplier as of August 19, 1996.

Petitioner asserts that the initial on-site survey of Petitioner was delayed by HCFA's
imposition of a requirement that as a prerequisite to being surveyed and approved, a
renal dialysis facility must have treated at least ten patients and generated records for
those patients. Petitioner asserts that, but for the imposition of this requirement by
HCFA, Petitioner could have been surveyed at an earlier date than August 19, 1996.
Petitioner argues that it would have been able to establish compliance with Medicare
requirements as of July 31, 1996. Petitioner's Brief at 2 - 3.

Petitioner contends that a requirement that Petitioner generate at least ten patient
records as a prerequisite to being surveyed is unreasonable. First, Petitioner asserts
that imposition of this requirement constituted substantive rule making by HCFA in
violation of the Administrative Procedure Act. Petitioner's Brief at 3 - 4. Second,
Petitioner asserts that imposition of the requirement by HCFA was arbitrary and
capricious. Petitioner's Brief at 4 - 5.

In addition to these two arguments, Petitioner asserts that HCFA reneged on a
promise it made to Petitioner concerning the date of Petitioner's approval as a
supplier. Petitioner asserts that HCFA's representatives promised it that Petitioner
would be approved retroactive to the date when Petitioner was licensed by the State
of California, and that the approval date of August 19, 1996, violates this alleged
promise. Petitioner's Brief at 5 - 6.

Petitioner's first two arguments reduce to an assertion by Petitioner that the on-site
survey of Petitioner was delayed for reasons that are unlawful. It is unnecessary for
me to decide the merits of this assertion or of Petitioner's underlying arguments.
Under the regulations governing approval, a supplier may not be approved at any date
earlier than the completion date of an on-site survey. 42 C.F.R. § 489.13(a). The
regulations do not permit either HCFA or an administrative law judge to look behind
the completion date of an onsite survey and order approval at an earlier date, even if
the survey was delayed unreasonably or unlawfully by HCFA. Id. I would not have
authority to order that Petitioner be approved prior to August 19, 1996, even if
Petitioner could prove that the initial survey of it was delayed due to imposition of an
unlawful or unreasonable requirement that it generate ten patient records as a
prerequisite to being surveyed.

Nor do I have authority to direct HCFA to honor any asserted promise that its
employees may have made concerning retroactive approval of Petitioner. The
regulations do not give HCFA or its employees the authority to waive the
requirements of 42 C.F.R. § 489.13. I do not have authority in equity to direct HCFA
to carry out an asserted promise that HCFA may not lawfully implement under the
applicable regulation. Petitioner's contentions about what HCFA's employees may
have promised it, therefore, are irrelevant, even if they arguably are true.

All three of Petitioner's arguments are, in effect, arguments that HCFA ought to be
estopped from applying the provisions of 42 C.F.R. § 489.13(a) to approve Petitioner
effective August 19, 1996. Similar arguments were raised by the petitioner in
GranCare Home Health Service & Hospice, DAB CR464, at 9 - 11 (1997). In
GranCare, I held that I did not have authority to estop HCFA from applying the
provisions of 42 C.F.R. § 489.13(a) to determine the effective date of participation of
a provider. I reaffirm that holding here. My authority is limited to deciding whether
HCFA approved Petitioner in accordance with the applicable regulation. There is
nothing in 42 C.F.R. § 489.13(a), or in any other regulation, to suggest that I may
estop HCFA from acting pursuant to 42 C.F.R. § 489.13(a), even where HCFA
arguably has acted unfairly or unlawfully to delay an on-site survey.

HCFA argues that, if Petitioner was required to generate ten patient treatment records
as a prerequisite to being surveyed initially, that requirement is reasonable and was not
imposed in contravention of the Administrative Procedure Act. It is unnecessary that
I address the merits of HCFA's arguments for the same reason that it is unnecessary
that I address the merits of Petitioner's arguments. Even if I were to agree with
HCFA's arguments, that would not affect my conclusion that I am without authority
to direct HCFA to approve a supplier at a date earlier than the completion date of the
initial survey of that supplier.

My decision in this case should not be read as a holding that a provider or a supplier is
precluded from challenging the determinations that HCFA makes from an initial
survey concerning whether or not a provider or a supplier was complying with
Medicare requirements as of the date of the survey. The regulations provide that a
provider or a supplier has a right to a hearing on the issue of whether it was in
compliance with Medicare requirements as of the date of the initial survey. 42 C.F.R.
§ 498.5. That right, potentially, could be meaningful in a case where HCFA
determines that a provider or a supplier should not be certified or approved as of the
completion date of an initial survey based on a determination that the provider or
supplier was not complying with all Medicare requirements as of that date. In that
case, the provider or supplier might be able to prove that it was complying with
applicable requirements as of the completion date of the survey, and, thus, prove that
it ought to have been certified or approved as of the completion date of the initial
survey.

______________________
Steven T. Kessel
Administrative Law Judge