1999.11.19 CR630 Specialty Hospital of Southern California

The facts that I recite here either are not disputed or are stated in a manner which is favorable to Petitioner. I base my recitation of the facts of this case largely on the statement of facts that is offered by Petitioner at pages 4 - 6 of Petitioner's memorandum in opposition to HCFA's motion to dismiss.

Petitioner owns and operates long-term acute care hospitals in California. Its primary facility is located in La Mirada, California (La Mirada facility). The La Mirada facility is certified by HCFA to participate in the Medicare program as a long-term acute care hospital.

On June 13, 1997, Petitioner acquired Covina Valley Community Hospital (Covina facility). At the time of the purchase, the Covina facility was an acute care hospital that participated in Medicare under a separate provider number from that which had been assigned to the La Mirada facility. Petitioner's purpose in acquiring the Covina facility was to turn it into a long-term acute care hospital and to combine its operations with those of the La Mirada facility. Petitioner's objectives included having HCFA classify the Covina facility as part of the La Mirada facility so that Petitioner could claim reimbursement for the items or services that were provided by both the La Mirada facility and the Covina facility under the provider number that had been assigned to the La Mirada facility.

There is a potential pecuniary benefit to Petitioner having the Covina facility consolidated into the La Mirada facility for Medicare reimbursement purposes. As a long-term acute care hospital, the La Mirada facility is exempt from Medicare reimbursement requirements known as the Prospective Payment System (PPS). However, at the time of its acquisition, the Covina facility was being reimbursed pursuant to PPS. Hospitals that are subject to PPS are reimbursed under Medicare in accord with prospectively determined rates whereas hospitals that are not subject to PPS are reimbursed under a different reimbursement scheme which, potentially, is more remunerative than is PPS. Consolidation of the Covina facility with the La Mirada facility would enable Petitioner to claim reimbursement for items or services that are provided at the Covina facility under the reimbursement system that governed the La Mirada facility. That would, effectively, remove the Covina facility from PPS.

Petitioner requested California State licensing authorities to revise the Covina facility's license to reflect its change of ownership and consolidation with the La Mirada facility. On October 7, 1997, California State licensing authorities approved the change of ownership and consolidation of the La Mirada and Covina facilities.

Petitioner thereupon applied to HCFA to have the Covina facility consolidated with the La Mirada facility for Medicare reimbursement purposes. On February 12, 1998, HCFA notified Petitioner that it was denying Petitioner's request for consolidation of the facilities. Petitioner continued after that date to discuss with HCFA its assertion that the two facilities should be consolidated for Medicare reimbursement purposes. Petitioner's discussions with HCFA included submissions to HCFA of various documents which were offered for the purpose of showing that, under governing standards and criteria, HCFA should consider the La Mirada facility and the Covina facility to be consolidated.

On November 20, 1998, evidently after reviewing Petitioner's submissions, HCFA approved Petitioner's request to have the La Mirada and Covina facilities consolidated for Medicare reimbursement purposes. HCFA advised Petitioner that, effective August 27, 1998, the Covina facility would be considered to be a campus of the La Mirada facility. HCFA told Petitioner that, beginning August 27, 1998, all Medicare reimbursement billings from the Covina facility should be made under the La Mirada facility's provider number.

Petitioner was dissatisfied with HCFA's action in that it disagreed with the effective date that HCFA had designated for consolidation of the two facilities for Medicare reimbursement purposes. The case was assigned to me. I afforded the parties the opportunity to file motions. Subsequently, HCFA filed a motion to dismiss the case and Petitioner filed a motion for summary disposition.

The issue in this case is whether I have the authority to hear and decide Petitioner's challenge to the date that HCFA found the La Mirada facility to be consolidated with the Covina facility for Medicare reimbursement purposes.

I make findings of fact and conclusions of law (Findings) to support my decision in this case. I set forth each Finding below as a separately numbered heading. I discuss each Finding in detail.

Under both the Social Security Act (Act) and implementing regulations, an individual or entity is entitled to a hearing concerning specified actions by HCFA which are defined to be "determinations." If an action by HCFA is not a determination about which a right to a hearing is conferred by the Act or regulations then no right to a hearing exists.

The relevant language in the Act governing an individual's or entity's right to a hearing with respect to an action taken by HCFA is contained in section 1866(h)(1). That section provides, in relevant part, that:

[a]n institution or agency dissatisfied with a determination by the Secretary
that it is not a provider of services . . . shall be entitled to a hearing thereon . . . .

Implementing regulations state, at 42 C.F.R. § 498.3(b), that HCFA makes initial determinations with respect to certain matters. These matters are defined to include:

The question here is whether HCFA's refusal to consolidate the La Mirada and Covina facilities for reimbursement purposes prior to August 27, 1998 is a determination that either facility was not a provider of services or a determination that either facility did not qualify as a provider. I conclude that, in establishing a consolidation date, HCFA never addressed the question of whether either facility qualified as a provider. Therefore, no determination was made by HCFA, either under the Act or under the implementing regulation, about which Petitioner has a right to a hearing.

This is not a case where an entity sought to be certified as a provider and now seeks a hearing based on HCFA's determination that the entity only qualified as a provider at some date other than the date that the entity contended it met certification requirements. HCFA's finding that the two facilities should be consolidated for reimbursement purposes has nothing to do with certifying either facility for participation. As HCFA notes, both the La Mirada facility and the Covina facility were certified as providers by HCFA prior to August 27, 1998. HCFA's finding that the two facilities were consolidated effective August 27, 1998 relates to the manner in which the two facilities should be classified for reimbursement purposes. HCFA's action on Petitioner's consolidation request is thus a reimbursement classification and not a certification of provider status.

This distinction may appear to be technical – and indeed, it is technical – but, nonetheless, it is a valid distinction for purposes of deciding whether Petitioner has a right to a hearing. With exceptions that are not relevant here, hearing rights attach only to a determination whether an entity qualifies as a provider. Generally, hearing rights do not attach to HCFA's classification of the type of reimbursement mechanism which governs an entity.

Under the regulations, certification is a process by which a facility establishes that it meets the criteria which govern Medicare participation. The certification process requires a survey of the facility by HCFA or on HCFA's behalf in order to determine whether participation requirements are met. 42 C.F.R. § 489.13. The certification process is designed to establish whether the facility meets the quality of care requirements that are contained in provider regulations that govern that type of facility.

The regulation which confers hearing rights provides for some exceptions to this general distinction between classification for reimbursement purposes and certification. For example, pursuant to 42 C.F.R. § 498.3(b)(9), HCFA's determination for reimbursement purposes of whether an end-stage renal disease (ESRD) treatment facility is considered to be hospital-based or independent is a determination which may give an ESRD hearing rights. Such a determination plainly is a classification determination. However, the fact that the Secretary has made an exception to allow for hearings involving such classification determinations underscores the fact that she has not made similar exceptions in the cases of other types of classification actions by HCFA.

Here, no certification process transpired. No certification survey was conducted. The issue that HCFA faced was not whether the Covina facility met certification requirements. Rather, the issue was whether the La Mirada facility and the Covina facility were operated in a way so as to meet reimbursement requirements which governed the operation of combined facilities. That issue had nothing to do with whether either facility independently, or both facilities in a combined capacity, met certification requirements.

HCFA cites a recent decision by the Departmental Appeals Board, Metropolitan Methodist Hospital, DAB No. 1694 (1999) as controlling precedent. I have reviewed that decision and I agree with HCFA that it governs this case. In the Metropolitan Methodist case, a hospital requested that HCFA exclude the hospital's 10-bed rehabilitation unit from PPS effective on a certain date. HCFA declined to do so because the hospital had not made its application timely. The hospital requested a hearing from HCFA's action. The administrative law judge to whom the case was assigned decided that what was at issue was a question of reimbursement classification and not an issue of provider certification. For that reason, the administrative law judge held that he was without authority to hear and decide the case. The Departmental Appeals Board agreed. As is the case here, there was no issue of provider certification in the Metropolitan Methodist case. The hospital was certified for participation prior to making its application for reclassification of its rehabilitation unit. The case did not involve the issue of whether either the hospital or the rehabilitation unit met provider participation requirements. The Departmental Appeals Board held that:

HCFA's action . . . fundamentally related only to how Medicare would pay for the inpatient hospital services provided in the rehabilitation unit; the action was not a determination that Metropolitan or its rehabilitation unit was not a provider of services under . . . the Act. Metropolitan did not seek to appeal here to establish that it met the conditions of participation to qualify as a "hospital" to provide inpatient hospital services under Medicare. Rather, metropolitan sought to establish that its rehabilitation unit met the conditions for reimbursement of those services using a different methodology.

Those precise considerations apply to this case. As I discuss above, Petitioner is not seeking to prove that either of the two facilities met conditions of participation. Rather, it is seeking to prove that Medicare should have paid for services in a certain way at dates other than HCFA found to be appropriate. What Petitioner seeks to establish is not something in which I have authority to hear and decide.

My consideration of the issues in this case is complicated somewhat by the fact that HCFA has not been consistent in advocating a position as to the hearing rights of parties in contesting reimbursement actions such as the one at issue here. Recently, I issued a decision in another case, Johns Hopkins Health Systems, DAB CR598 (1999). In that case I decided the question of whether an outpatient facility of a hospital should be considered to be combined with the hospital for reimbursement purposes. On reflection, it now appears that I may not have had the authority to hear and decide that case. The Johns Hopkins case involved a classification issue and not an issue of certification of a provider to participate in Medicare.

At the inception of the Johns Hopkins case I was concerned about whether I had the authority to hear and decide it. I directed the parties to brief the issue of my authority. Both parties asserted that I had the authority to hear and decide the case. I agreed to hear and decide it only because the petitioner and HCFA urged me to do so. On reflection, it may be that I should have found that I lacked the authority to hear and decide the case despite the fact that HCFA asserted that I had such authority.

2. The issue of whether Petitioner filed its hearing request timely is moot.

HCFA contends, as an alternate ground for dismissing Petitioner's hearing request, that Petitioner has no right to a hearing because it did not file its request timely. Petitioner disputes HCFA's contention.

This issue is moot. There is no need for me to decide it inasmuch as I do not have the authority to hear and decide this case.